www.RaghuStockAdvisors.
com
T.V. Today Network Ltd
[September 2017]
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Snapshot
Price 272
Market Capital 1621 crores
Yearly Profits [2017] 100 crores
Price to Earnings 16.21
Total Debt [Short + Long Term] Debt Free
52 Week High/Low 360/211.00
ROE 18.30%
Indicative Buying Range Below 275
1. Even though there is a general negative perception about news channels in India, this
company has got a debt free balance sheet and good amount of cash on books [Around
260 crores of cash]
2. As the valuations are reasonable, we recommend to consider this company for medium
term investment [1-2 years].
3. One can allocate up to 10% of his or her portfolio in this stock. This is just an indicative
purpose and everyone need to allocate based on their risk appetite and return
expectations.
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Products
1. The company mainly operates in two segments namely television news and radio
broadcasting. The Company operates four news channels namely:
Aaj Tak [This is the main contributor to the revenue]
India Today
Tez
Dilli AajTak
2. The Company also operates three FM radio stations under brand ISHQ 104.8 FM in Delhi,
Mumbai and Kolkata.
3. In addition to this, company has recently acquired 100% stake in loss making newspaper
publishing business named ‘Mail Today’.
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Revenue Contribution
1. Majority of the revenue is generated from the news business:
Segmentwise Revenue
1%
6%
Television broadcasting
Radio broadcasting
Newspaper publishing
93%
2. As can be seen 93% of the revenue is generated from the news channels while only 7%
comes from radio and newspaper business.
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Segmental Performance
1. The television broadcasting is the only profitable business with other businesses [Radio and
Newspaper] being in losses. Here is the segment results showing the performance of each
division:
Television Broadcasting 157.72 Cr
Radio Broadcasting (17.50) Cr
Newspaper (2.83) Cr
2. The company tried to sell off its radio business but did not get the permission from the ministry
of broadcasting. The company might try to sell off this business in the future.
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Competitive Landscape – Hindi News
1. Most of the group revenues come from Aaj tak Hindi news channel. Below graphic shows the
market share of Aaj Tak channel:
2. There are 4 major Hindi news channels which together command 50% viewership and the
remaining 8 news channels command another 50% market share.
3. Aaj tak commands 16.8% market share in Hindi news. Aaj tak is a leader in Hindi news
segment.
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Competitive Landscape – English News
1. India Today is the English news channel which was earlier known as ‘Headlines Today’. The
channel grew its market share to 22.7% during last quarter of FY 2017 from 16.9% during first
quarter of FY 2017.
2. In the prime time [Time ranging from 19:00 to 24:00], the channel was number 2 throughout
FY 2017.
3. With the recent launch of Republic news channel, the competitive intensity has increased
further in the English news space and this had pushed the channel to number 3 position
during the current financial year.
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Competitive Advantage
1. The company has news brands like ‘Aaj Tak’ and ‘India Today’ which carry some branding
power. Although news is a commodity business, the presence of even minor branding helps
in retaining the viewers.
2. Aaj Tak has maintained its leadership in Hindi news space for over 15 years now.
3. Every week BARC publishes the data about the viewership in both rural and urban markets.
The ratings show that ‘Aaj Tak’ is a clear leader week after week.
4. The financial health of most of the news broadcasters is not good but this company has got
good financial health due to higher advertising prices. In case of any consolidation in the
Industry then the viewership share will further improve.
5. Globally News broadcasting leaders are fantastic franchisees and they have been able to
return healthy returns on capital sustainably for a long periods. They have expanding Moats
and dislodging incumbents in this sector has always been a tough job. You have clear
market leaders in each region and the Top-2 brands are extremely profitable and healthy.
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Scalability
1. The Indian television industry is expected to reach a size of 116,600 crores by 2021.
2. TV households are expected to further increase from 18.1 crores in 2016 to 20.3 crores in 2021.
3. The television advertising revenue is set to increase from 22,500 crores in 2017 to 39,400 crores
in 2021. This is a growth rate of almost 14% CAGR.
4. The content produced by the company can be monetized over online as the consumption
of videos is going up with the increased penetration of internet.
5. As the consumerization of Indian society evolves, dominant media platforms will become
more valuable. There will be several drivers to this trend such as increase in Organized Vs
Unorganized trade, National Brands, More competition etc.
6. Advertising spending in India is one of the lowest in the world. Even compared with other
developing markets such as China, Indonesia, etc. - India has a 6X growth opportunity in
terms of increase in advertising spending.
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Numbers - Sales, Profits, OPM
1. The sales have consistently increased over the past 10 years at the rate of 11.7% CAGR.
2. Profits too increased at the rate of 12.5% over this period.
3. From FY 2009 to 2013, the operating margins was very low due to general economic
slowdown. The operating margins during normal years is above 25%.
4. The tax rate is above 30%.
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Numbers - Dividend
The dividend payout ratio is at 12% for most of the years when the business has done well.
This is very conservative dividend payout. This can be due to the fact that management
wants to conserve the cash for new initiatives [like new channel launches].
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Numbers – Balance Sheet
1. The company has 260 crores in cash.
2. The balance sheet is absolutely clean with almost NIL debt.
3. The management has not diluted the equity right from the time of IPO.
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Management – Salary
The owners take home salary is 11.7 crores which is more than 10% of the net profits. This is on
the higher side but we feel that this can be ignored.
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Management – Promoter Holding
The promoter holding is at 57% which is good enough.
Promoter Holding
Indian Promoters
10%
Mutual Funds
19%
Bodies Corporate
58%
Indian Public
5%
NRI, Trust and Foreign
8% Investor
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Valuations
1. The company currently trades at a market capitalization of 1621 crores.
2. The total profit earned during FY 2017 is 100 crores which gives the price to earnings multiple
[P/E] of 16.21. We arrived at the P/E by dividing the market capitalization by the net profit for
whole year.
3. The enterprise value of the stock is 1361 crores [Market capitalization – Cash] which is decent
valuation for a company with net profits of 100 crores.
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Risks & Concerns
1. There is a lot of competition in the news broadcasting business as most of the news
broadcasters continue to be in the business for political reasons rather than for the profits.
2. The proliferation of social media has an impact on the television viewership.
3. Now-a-days news is being consumed over the online sources and this can impact the
viewership of television news broadcasters.
www.RaghuStockAdvisors.com
www.RaghuStockAdvisors.com
Check List
Competitive Advantage
Scalability
Numbers - Sales, Profits, OPM
Dividend x
Numbers - Balance Sheet
Management Salary x
Management – Promoter Holding
Valuations
The company gets tick mark on all parameters except the dividend & management salary.
www.RaghuStockAdvisors.com
