Yesterday’s Market Performance

Nifty: 18102.80 I 229.20 (1.28%)
FII Buy Net: INR 10362.94 Cr
DAX: 16,094.07 I  10.96 (0.07)

Sensex: 60686.69 I 767.00 (1.28%)
DII Buy Net: INR 6818.71 Cr
FTSE: 7,347.91 I -36.27 (-0.49)

Howdy Toasters!

In today’s issue of the Morning Toast, we discuss: 

• Zee Ent. awaits merger completion with Sony
• Vodafone Idea asks for help
• Results Preview
• An education concept to keep you chugging along

Zee Entertainment waits for merger with Sony Pictures to consummate, amid Q2 results; What’s up and What do you need to know?

• The company recorded ~15% YoY growth in revenues, supported by ~21% growth in ad-revenues (which was far lower when compared to Sun TV’s 40%) and a significant rise in operating revenues due to a movie syndication deal
• On a 2 Yr CAGR basis, Zee has recorded a 6% decline in domestic ad-revenues, with the second wave (during the first half of Q2) severely impacting growth
• Total subscription revenues declined by 1.5% YoY, impacted by the delay in NTO 2.0 (we covered the new regulations in detail, click here to know more), which continued to affect pricing
• From a bottom line perspective, the company recorded a ~32% YoY growth in absolute EBITDA # and a ~2.7% growth in %, which were below Bloomberg estimates on account of elevated costs across –
  • Programming & Content costs, with higher original content production, across locations due to localised lockdowns
  • Higher marketing spends for new content launches
  • Sustained investments in Zee5

Interesting! Tell me more? 

• Zee launched 30+ new shows during the quarter, which reflected in market share gains across key channels (+0.7% QoQ), with new shows planned for Q3, the current run-rate should continue
• The management indicated that Q2 was a recovery quarter with respect to ad-revenues, with the gradual re-opening of the economy leading to increasing spends by advertisers, with H2FY22 revenues expected to touch pre-Covid-19 levels
• Zee5 launched 13 original shows during the quarter, with another 17-18 likely to be released during Q3/4; the company expects revenues to be in an upward trajectory, especially with launch of new shows
• The company has a healthy pipeline of movies, expected to cater to regional audiences, primed to release in the coming quarters

 Nice! Final thoughts? What to expect, Sony Deal Status? Valuations et al.

• The company expects higher Advertising & Promotions spends to continue going forward (with a view towards market share revival), with EBITDA margins likely to depend on extent of ad-revenue recovery
• Merger with Sony Pictures is on-track, with the company highlighting the due-diligence process is progressing as per deadlines (vague, I agree)
• The stocks been stuck in a range, after the announcement of the Sony deal, with the next rally likely to depend on the outcome of the diligence process, shareholder approval on deal & ad-revenue recovery

  Keep a track?

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Vodafone Idea asks for help (yet again!)! What’s up and what do you need to know?

• Vodafone Idea will not be able to pay quarterly licence fees (LF) and spectrum usage charges for the second, third and fourth quarters of this fiscal year
• They are willing to pay these charges, that total around Rs. 6000 crore along with interest, in May of 2022.
• The DoT is yet to take a call on this request

What’s the background? 

• There are three categories of dues that Vodafone owes – Adjusted Gross Revenue (AGR) dues, License Fees (LF) and spectrum usage charges (SUC)
• The DoT announced a four-year moratorium on AGR dues (but only on the retrospective dues)
• Since the telecom operator was using airwaves, they were asked to pay up the LF and SUC without any relief on the same (which are about Rs. 2000 cr per quarter cumulatively)

Why can’t Vodafone pay? 

• Vi has a debt totalling Rs. 1.96L crore and needs to invest in infrastructure to stay in the race against Jio and Airtel
• Vi is refusing to pay in spite of numerous relief measures offered by the DoT – including redefining AGR to exclude ‘non-telecom’ items which reduced the burden considerably
• They have also been unable to raise money (with their latest failed attempt to raise Rs. 25000 crore) and don’t have much of a war chest (with a cash balance of Rs. 920 crore)

Damnnn, give us some numbers too?

• Vi has past AGR dues of Rs. 58,254 crore, of which they have paid Rs. 7,854 crore (note that they have to pay this by FY25-26 owing to the four-year moratorium)
• Their liabilities however do not end here – they have around Rs. 6400 cr towards non-convertible debentures in FY22 and Rs. 4900 cr in FY23

Any good news? 

• Yes, they are working on a restructuring plan with a new investor coming in + Mr. Kumar Mangalam Birla making an additional investment and banks restructuring their loans
• How much they invest, and what remains of this iconic teleco is yet to be seen!

What else caught our eye? 👀

Sapphire Foods IPO at 6.6 times 

• Sapphire Foods India Ltd. saw its IPO subscribed by 6.6 times with the institutional investors category receiving bids of ~40 million shares
• Non-institutional category (with HNIs) was subscribed 3.46 times, while retail investor demand was at 8.7 times
• Sapphire Foods is the owner/operator for KFC, Pizza Hut, Taco Bell etc. for many countries in SE Asia

Good news for India’s GDP 

• Observer Research Foundation in its latest report believes that India’s GDP will rise by $406 bn by 2050
• A target of 43 million jobs created has also been proposed
• A large part of this optimism comes against the gov’s promise to reach net-zero carbon emissions by 2070 at COP26

Go Fashion IPO up next 

• GoColors (owned by Go Fashion India Ltd) has its IPO coming on November 17th
• A fresh issue of Rs. 125 cr and a OFS for 12.88 million shares is proposed
• They are involved in the development, design, sourcing, marketing and retailing of women’s bottom-wear products with a market share of 8%

Saturday, 13th November: Atul Auto, Godrej Industries, Honeywell Auto, IPCA Labs, JK Cements, Karur Vysya Bank. Siemens

Sunday, 14th November: Info Edge (India) 

Monday, 15th November: Rajesh Exports