AT A CROSSROADS

Zee's plan to gun for growth on it own holds perils as well as promise

- VANITA KOHLI-KHANDEKAR

Has Zee Entertainment Enterprises decided to be a lone ranger? On January 22 this year, Culver Max Entertainment (Sony) pulled out, at the last minute, of a merger that Sony and Zee had been working on for more than two years. Soon after began the legal name calling.

On February 13 came Zee's third quarter earnings call, where managing director and CEO Punit Goenka talked of cost cutting, frugality and optimisation.

Historically, Zee has delivered gross profit margins between 25 and 30 per cent. These started falling in 2023 and reached just over 10 per cent in the third quarter of 2023-24 (FY24). Rising content costs, investment into its streaming app Zee5, a soft ad environment, and the distractions and expense of the merger led to the drop.

Ever since the breakup, there have been more than a dozen announcements from the ₹8,088 crore (revenues in FY23) company.

It has committed to prune its workforce by 15 per cent, cut costs at its Bengaluru-based Technology and Innovation centre to half of the ₹600 crore spent last year, reorganised certain business, and so on. Goenka, who has taken a 20 per cent salary cut, seems determined to get to 18-20 per cent in Ebitda, or earnings before interest, taxes, depreciation, and amortisation by FY26, from 14 per cent in FY23. An Ebitda of 18-20 percent should amount to 2,000 crore.

Much of this action probably helped the share price rise a bit in the stock market rally last week.

Most analysts do not doubt that Goenka, who has run the company since 2006 and built it into a cash spewing machine, will meet his target on margins.

"Zee and Sony are individually profitable and business will go on," says Kunal Dasgupta, founder of iTap Entertainment and Gaming, and former CEO of Sony. Zee has more than 90 channels (50 of them in India) in Hindi, Marathi, Telugu, and other languages. It has a 17 per cent share of television viewership.