3. 1. Company overview:
Zee Entertainment Enterprises Limited (ZEE) (BSE Code: 505537, NSE Code: ZEEL.EQ) is one
of India’s largest vertically integrated media and entertainment company. ZEE was the first
company to launch a satellite channel in India and from being a single channel for a single
geography today operates multiple channels across multiple geographies in different languages
and genres. The Company’s programming reaching out to over 500 million viewers across 167
countries. It was established in 1992. Founded by Mr. Subash Chandra and he is the current
CMD of ZEE. This enterprise was to act as the chief content provider for Zee TV - India's first
Hindi satellite channel. Zee Telefilms Limited (ZTL) is now known as Zee Entertainment
Enterprises Limited (ZEE).
Very early in the aftermath of launching ZTL, Subhash Chandra entered into a joint venture with
the STAR group of companies. This pact was to augment television broadcasting in India and
deliver higher quality of programming content. In another development around the same time,
media mogul, Rupert Murdoch's News Corp Limited acquired the rights to distribute STAR's
satellite TV content. This made News Corp a de facto partner of ZEE. To strengthen their
network further, ZEE and News Corp co-founded Siticable, a leading cable MSO. In March 2000
however, ZEE bought News Corp's stake in both the broadcasting business and Siticable.
ZEE, over the years has built a diverse portfolio of leading businesses and has driven initiatives
that increase efficiency at every juncture of development. ZEE has established a very strong
consumer connect and is governed by a set of values that holds them in good stead in the face of
changing viewer environments.
1.1. Key Milestones:
2012 Launches Ditto TV - India's first and only OTT (Over-The-Top TV) Distribution
Platform
Launches Ten Golf – India's first and exclusive 24 hour Golf channel
Launches ZeeQ - India's first Kids Edutainment Channel
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4. 2011 ZEE's distribution arm, Zee-Turner Ltd, enters into a 50:50 JV with Star Den
Media Services Pvt. Ltd. to form MediaPro Enterprise India Pvt. Ltd.
Announces share buyback for an aggregate expendable amount not exceeding
7,000 million.
2010 Launches Zee Khana Khazana – India's first 24-hour food channel.
Launches Zee Salaam - India's first Urdu infotainment satellite television channel
Acquires stake in Ten Sports.
Launches Ten Cricket - a dedicated 24-hour Cricket Channel.
Launches Ten Action+ - sports channel showcasing the best football action from
around the world.
Launches India.com - Joint Venture between Zee Entertainment Enterprises Ltd.
and Mail.com Media Corporation
2007 Zee Entertainment Enterprises Limited (ZEE) gets listed as an independent
company.
2006 De-merger of Zee Telefilms Limited.
2003 Launches 5 new channels for the DTH market viz. Action cinema, Classic
cinema, MX, Premier cinema and Smile TV.
Enters into a distribution tie-up with Rajshri Pictures for theatrical distribution of
films in India.
Launches 'Trendz' - A premium fashion and style channel, targeted at the fashion
conscious Indian consumer.
2002 Acquires controlling stakes in ETC Networks Limited and Padmalaya Telefilms
Limited.
2001 Introduces Zee TV and Zee News as pay television offerings.
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5. 'Gadar - Ek Prem Katha' became highest grossing box office movie.
2000 Launches Internet over Cable services - Becomes first cable company in India to
do so.
Enters into content distribution joint ventures with MGM and Viacom.
Launches pay bouquet of channels in the Asian region.
1999 Acquires News Corp's 50% stake in joint ventures of their television broadcasting
business tie-up.
Launches regional channels.
1998 Launches Zee TV in the US.
Institutes a prime award in the film segment called 'Zee Cine Awards'.
1997 Launches Zee Music (originally called Music Asia).
1996 Starts first cable channel in India - Siti Channel.
Launches Zee TV, Africa.
1995 Commences Siticable operations Joint Venture with News Corp.
Launches Zee News and Zee Cinema.
Zee TV goes global - launches Zee TV, UK
1992 Launches Zee TV.
Initial Public Offering (IPO) of Zee Telefilms Limited.
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6. 2. Board of Directors:
• Non-Executive • Director and Strategic • Started his career with
Chairman of the Board Marketing Advisor to Dish ITC Ltd., in 1972, rising to
and promoter of Essel TV and Playwin the position of Marketing
Group of Companies • He is also a Founder Controller in its Hotels
• His industry leading Partner of Hanmer & division
businesses include Partners, one of India’s top- • An MBA from Delhi
television networks and three Public Relations University and a Cambridge
film entertainment, cable agencies, Flora2000, one of Graduate from Bishop
systems, satellite the leading global online School
communications, theme flower distribution services,
parks, flexible packaging, as well as Remindo, an
family entertainment Intranet 2.0 Office
centers and infrastructure Communication Network
• He also works as a special
advisor to the US$7 billion
Publicis Group
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7. • An • Has been the • Professor of • Managing Director
accomplished Chairman of Finance and and
entrepreneur, J&K Bank and Control at the IIM, Chief Executive
who founded Director on the Bangalore and UTI Officer of ZEE
Bombay Halwa Board of Bharat Chair Professor in • Participated in
Limited, a Hotels, as well as the area of Capital various intensive
Advisor for Markets Management
Company
Berenson & • Fellow Member Education Programs
engaged in the
Company, New in Management like
business of
York (Doctorate) from Young Managers
manufacturing
• Doctorate of the IIM, Kolkata Program at INSEAD,
Indian Philosophy in • Masters from the France and a program
confectionery, Business Indian Statistical on “Birthing of Giants”
Indian savories Management(PHD) Institute and hosted by Young
and from Burkes graduate from Entrepreneurs’
aviation catering University in UK Loyola College, Organization and MIT
• Science graduate Chennai Enterprise Forum, Inc.,
from the Boston, USA
University of
Kashmir.
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8. 3. Products:
Hindi Entertainment Zee TV, Zee Smile, 9x
Hindi Movies Zee Cinema, Zee Cinema HD, Zee Premier, Zee Actions, Zee
Classic
Regional Languages Zee Marathi, Zee Bangla, Zee Talkies, Zee Telegu, Zee Kannada,
Entertainment Zee Tamil, ETC Channel Punjabi
Sports Ten Sports, Ten Action, Ten Cricket, Ten Golf, Ten HD
English Entertainment Zee Studio, Zee Studio HD, Zee Café, Zee Trendz
Niche Offerings Zee KhanaKhazana
Music Zing, Zee ETC
Alternate Lifestyle Zee Jagaran, Zee Salam
Edutainment ZeeQ
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9. 4. Director’s Report:
The Directors' Report is a document produced by the board of directors, which details the state of
the company and its compliance with a set of financial, accounting and corporate social
responsibility standards. The duty of directors to produce a Directors' Report once a year under
the section 415 of the Companies Act, 1956. Under section 416, the contents must include the
directors' names and the company's principal activities.
From the analysis of annual reports of Zee Entertainment Enterprises Limited, we came to know
that Director’s had been starting the reports by declaring the following Responsibility Statement
in accordance with the provisions of Section 217 (2AA) of the Companies Act, 1956, in relation
to the Annual Financial Statements:
a) The Financial Statements have been prepared on a going concern and on the accrual basis
and in the preparation of these Financial Statements, applicable accounting standards
have been followed and there are no material departures;
b) Accounting policies selected were applied consistently and the judgements and estimates
related to the financial statements have been made on a prudent and reasonable basis, so
as to give a true and fair view of the state of affairs of the Company as at March 31, 2011
and of the profit of the Company for the year ended on that date; and
c) Proper and sufficient care has been taken for maintenance of adequate accounting records
in accordance with the provisions of the Companies Act, 1956, to safeguard the assets of
the Company and to prevent and detect fraud and other irregularities.
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10. 4.1. Financial Results:
The Financial Performance of your Company for the year ended March 31, 2011 is summarized
below:
In Rs. Cr.
Particulars 31 31 31
March March March
2011 2010 2009
Sales & Service 2169.94 1278.74 1210.24
Other Income 64.31 106.18 105.09
Total Income 2234.25 1384.92 1315.33
Total Expenses 1409.70 776.58 939.19
Profit before Tax & Exceptional Items 824.54 608.34 376.19
Less Exception item–Provision for Diminution in value of 19.68 - 2.58
Investment
Provision for Taxation (net) 267.81 49.50 69.03
Profit After Tax 576.42 558.84 309.74
Add: Balance brought forward 1111.18 889.34 720.94
Amount available for appropriations 1687.59 1448.19 1030.69
Appropriations
Dividend 195.63 194.68 86.80
Tax on dividend 31.74 32.33 14.54
General Reserve 300.00 110.00 40.00
Balance carried forward 1160.23 1111.18 889.35
4.2. Business overview:
During the year 2011, rebounding from the recession, Zee continued to focus on high quality and
innovative content in a highly competitive market providing compelling value for trade partners
thereby yielding rich returns.
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11. Zee has been at the forefront in leveraging the digital delivery opportunity. a range of
opportunity. A range of initiatives were undertaken including developing new offerings, reaching
out to new viewers, portfolio expansion, premium content offerings which have helped generate
subscription revenues for the portfolio, in addition to expanding their viewers base.
4.3. Corporate Re-Branding:
As part of the journey towards building a globally recognized brand, increasing viewer
relevance, achieving industry leadership and taking forward the progressive outlook, Zee had
recently unveiled rebranding and repositioning of the Corporate and Channel logos, which they
believes would enhance the mindshare and viewer loyalties towards the product offerings of Zee.
The entire rebranding exercise was conceptualized, designed and executed internally.
4.4. Corporate Restructuring:
During the year under review, in order to concentrate on growth efforts of the Cricket
broadcasting business in a focused manner and enable rationalization of the holding structure,
Board had approved a Scheme of Amalgamation for merger of 2(two) overseas subsidiaries of
the Company, viz. ZES Holdings Ltd, Mauritius and Zee Multimedia Worldwide Limited, BVI
with the Company from February 1, 2011. Upon appropriate approvals, the said Scheme became
effective from June 20, 2011 and the financial impact of the Scheme has been given effect to in
these Annual Financial Statements.
4.5. Share Capital:
During the year, the following changes were effected to the Share Capital of the Company:
140,844 fully paid-up Equity Shares of Rs. 1 each were issued and allotted to the shareholders of
9X Media Private Ltd, pursuant to the Scheme of Arrangement with 9X Media approved by
Hon’ble Bombay High Court on September 9, 2010. 489,038,065 fully paid-up Equity Shares of
Rs. 1 each were issued and allotted as Bonus Shares in ratio of 1 Bonus Equity Share for 1
Equity Share held on November 12, 2010, being the Record Date fixed for the purpose.
Subsequent to the financial year-end, 66,800 fully paid-up Equity Shares of Rs. 1 each were
issued and allotted upon exercise of stock options under the Company’s Employees Stock Option
Scheme. Consequent to these allotments, the paid-up Share Capital of the Company as on the
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12. date of this Report stood at Rs. 978,142,930 comprising of 978,142,930 Equity Shares of Rs. 1
each (March 31, 2011 - 978,076,130 Equity Shares).
4.6. Buy Back:
Special Resolution approving Buy-back of up to 25% of Company’s paid-up Equity Share
Capital at a price not exceeding Rs. 126 per Equity Share subject to the condition that the
aggregate amount to be expended by the Company for the said Buy-back shall not exceed Rs.
700 Crores, was passed by the Members through the Postal Ballot process on March 25, 2011.
Upon coming in to effect of the Scheme of Amalgamation of foreign subsidiaries, the Company
has initiated further process on the proposed buy-back of equity shares.
4.7. Employees stock option scheme:
The Company had not granted any stock options during the year. The Statutory Auditors of the
Company M/s. MGB & Co., Chartered Accountants have certified that the Company’s Stock
Option Scheme has been implemented in accordance with SEBI Guidelines and the resolution
passed by the shareholders.
4.8. Public deposits:
During the year, the Company has not accepted any Deposits under Section 58A and Section
58AA of the Companies Act, 1956, read with Companies (Acceptance of Deposits) Rules, 1975.
4.9. Directors:
During the year under review Mr. Laxmi N Goel, one of the Promoter Director of the Company,
resigned with effect from the close of September 30, 2010. Further, in line with the retirement
policy for Independent Directors approved by the Board based on the suggestions in the
Corporate Governance Voluntary Guidelines issued by the Ministry of Corporate Affairs, Mr. N
C Jain and Mr. B K Syngal, Independent Directors resigned from the Directorship of the
Company with effect from the close of business on March 31, 2011. Mr Ashok Kurien and Lord
Gulam Noon, Directors, retire by rotation at the ensuing Annual General Meeting and, being
eligible, offer themselves for re-appointment. The Board has recommended their re-appointment.
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13. 4.10. Auditors:
The Statutory Auditors M/s MGB & Co., Chartered Accountants, Mumbai, having Firm
Registration No 101169W, hold office until the conclusion of the ensuing Annual General
Meeting and are eligible for reappointment. The Company has received confirmation from the
Auditors to the effect that their reappointment, if made would be within the limits prescribed
under Section 224(1B) of the Companies Act, 1956 and that they are not disqualified for
reappointment within the meaning of Section 226 of the said Act.
4.11. Particulars of Employees:
The Company had 1,757 employees as of March 31, 2011. In terms of the provisions of Section
17(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules,
1975, as amended, the names and other particulars of the employees, who were in receipt of
remuneration of Rs. 60 lakhs or more per annum.
The board of Directors are:
Punit Goenka, Managing Director & CEO
M Y Khan, Director
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14. 5. Management Discussions and Analysis:
5.1. Key highlights during the year include:
In Malaysia, Zee has been consistently ranked amongst the top two International channels
among Malay Viewers.
In Middle East, Zee Aflam garnered an all-time high viewership of around 39 GRPs in
the Arab market.
In Singapore, Zee TV Asia Pacific became the first and only Hindi General
Entertainment Channel to get rated on Kantar Media Rating System as its viewership
crossed the minimum threshold defined by the local rating agency, TNS.
As per Nielsen, Zee TV gets the highest viewership share among South Asian channels in
the USA.
5.2. Business Strategy:
The key elements of Zee’s strategy during the year were
i. To take appropriate steps to safeguard its leadership position in a fiercely competitive
environment
ii. To concentrate on additional revenues from digital pay platforms
iii. Rationalize on costs across different heads
iv. Fortify its expansion in the international markets
v. Maintain consistently high standards of corporate governance.
5.3. Other Company Information:
i. Internal Control Systems: The Company has in place adequate internal control systems,
commensurate with its size and nature of operations so as to ensure smoothness of
operations and compliance with applicable legislation. The Company has a well-defined
system of management reporting and periodic review of businesses to ensure timely
decision-making. It has an internal audit team with professionally qualified financial
personnel, which conducts periodic audits of all businesses to maintain a proper system
of checks and control. The management information system (MIS) forms an integral part
of the Company’s are monitored and controlled. Any material change in the business
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15. outlook is reported to the Board. Material deviations from the annual planning and
budgeting, if any, are reported to the Board on quarterly basis. An effective budgetary
control on all capital expenditure ensures that actual spending is in fine with the Capital
Budget.
ii. Human Resources: The Company seeks, respects and values the diverse qualities and
backgrounds that its people bring to it and is committed to utilizing the richness of
knowledge, ideas and experience that this diversity provides. The work environment is
stimulating and development of core competencies through format training, job rotation
and hands on training is an ongoing activity.
5.4. Risk Factors:
Competition from other players:
The Company operates in highly competitive environment that is subject to innovations, changes
and varying levels of resources available to each player in each segment of business.
Ever changing trends in Media sector:
It may not be possible to consistently predict changing audience tastes. People’s tastes vary quite
rapidly along with the trends and environment they live in. This makes it virtually impossible to
predict whether a particular show or serial would do well or not. With the kind of investments
made in ventures, repeated failures would have an adverse impact on the bottom line of the
company.
Cost of programming mix might affect its bottom line:
The urge to compete and provide the best content to viewers, Zee would have to incur high
expenditure to provide an impetus on its programming front from time to time. The increase in
costs might not necessarily perk up its revenues in the same proportion.
Investments in new channels:
The Company may from time to time launch new channels. Content for these channels is
obtained from its existing library as well as from programmes acquired in the normal course of
its business. The success of any new channel depends on various factors, including the quality of
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16. programming, price, extent of marketing, competition etc. There can be no assurance that the
Company will be as successful in launching new channels as it has been the case of its existing
channels.
Macroeconomic environment:
Macroeconomic environment can be a potential source of risk. The unpleasant trinity of
moderating growth, high inflation and monetary tightening can adversely impact advertising
revenues of the Company, which forms the largest component of the Company’s revenues.
Slowdown in DTH/Digital rollout:
The uptake of pay digital services by subscribers has been a very encouraging sign for all
broadcasters. Internationally most broadcasters derive a greater share of their revenues from the
subscription revenues whereas in India the under-declaration in the analogue cable system has
led to broadcasters being more dependent on advertising revenues, which tend to cyclical in
nature and more affected by the macro economic factors. The industry expects pay digital
services to grow at over 25% CAGR in the next three years and Zee is likely to benefit heavily
from this rapid growth. A slowdown in growth of digital services may lead to incremental profit
margins being impacted.
Increased competitive environment in the Hindi General Entertainment Space:
The Hindi GEC genre is amongst the key genres for all advertisers and hence is most lucrative to
all the TV broadcasters. Any new competition in the space can have an impact on the Company’s
revenues.
Sluggish consumer uptake in the international markets:
ZEE has been a pioneer in the international markets and has the highest market share amongst all
South East Asian broadcasters across Europe and USA. Indian content in these markets serves
the preference of a niche audience and ZEE has strong relations with distribution platforms in
these markets giving management the confidence that the Company will retain market share in
key geographies. In the given slowdown, consumers may find it difficult to upgrade their
packages and the value growth from these markets may get affected.
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17. Cannibalization of analogue cable revenues due to increased digital pay revenues:
The television distribution system in India is primarily analogue in nature and continues to be
impacted by the rampant underdeclaration and piracy by the last mile cable operators. With the
advent of digital pay TV services such as DTH and digital cable, a clear shift in consumer
preference has emerged with all of the expansion in the cable and satellite adoption coming on
the back of these digital services. Though analogue cable is still under-reported, this expansion
of digital DTH services may lead to cannibalization of analogue cable revenues in the near term.
Increase in cost of acquisition for some of the key sports properties:
While a significant amount of rights have been signed on by the Company for leading sports
properties, any future contracts may be at higher costs, which may put pressure on margins of the
company.
The Company may be exposed to foreign exchange rate fluctuations:
The Company receives a significant portion of its revenues and incurs a significant portion of its
expenses in foreign currencies, particularly US dollars and UK pounds. Accordingly, the
Company is exposed to fluctuations in the exchange rates between those currencies and the
Rupee, the Company’s reporting currency, which may have a substantial impact on its revenues
and expenses.
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18. 6. Financial Statement Analysis:
Performance Ratios:
Particulars 2011 2010 2009
LIQUIDITY RATIOS
Current Ratio 2.94 3.08 4.57
Quick Ratio 2.26 2.49 3.80
PROFITABILITY RATIOS
Gross Profit Margin Ratio 29.61 30.62 24.93
Net Profit Margin Ratio 20.74 28.03 23.98
Return on Investment 29.10 18.01 14.79
Return on Equity 20.20 16.12 15.36
EFFICIENCY RATIOS
Inventory Turnover Ratio 2.66 2.01 1.52
Inventory Holding Period 137 181 240
Debtor’s Turnover Ratio 3.37 2.94 3.38
Average Collection Period 108 124 108
Creditor’s Turnover Ratio
Average Payment Period
Asset Turnover Ratio 0.97 0.55 0.53
COVERAGE RATIO
Interest Coverage Ratio 102.16 19.61 13.02
Equity Dividend Coverage Ratio 3.20 3.16 6.02
Fixed Charges Coverage Ratio
LEVERAGE RATIO
Long-Term Debt to Equity Ratio 0.00 0.03 0.17
Total Debt to Equity Ratio 0.76 0.68 0.97
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19. 6.1. Analysis:
After preparing the performance ratio of Zee for the year ended 31st March 2011 and previous
two years i.e. 2010 and 2009, we are now able to evaluate the company’s survival and growth.
Evaluating Zee in 2011 relative to the previous two years, it becoming slightly less liquid than
previous two years as both the current and quick ratio are decreasing. The average collection
period is same as compared to 2009, but in 2011 it was increased. The company has to evaluate
its credit policies to maintain a good favorable collection period. The Asset Turnover Ratio of
the company is increasing in the last three years. Therefore we can say that the assets
management of the company is running properly to generate sales. The long term debt to Equity
ratio has become nil. Therefore we can say that the financial risk of the company is decreasing
but the Total Debt to equity ratio is fluctuating at a less changes. The company is becoming more
leveraged than last year. The efficiency ratios are increasing during the period under review.
That’s why Zee is improving its efficiency towards the current competitive industry scenario.
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20. 7. Corporate Governance:
Zee has been reassessing and benchmarking itself with well-established Corporate Governance
practices besides strictly complying with the requirements of Clause 49 of the Listing
Agreement. The Company has documented internal governance policies and put in place a
formalized system of Corporate Governance which sets outs the structure, processes and
practices of governance within the Company and its subsidiaries. Given the emerging pivotal
role of Independent Directors in bringing about good governance, the Company continues its
efforts in seeking optimum utilization of their expertise and involving them in all critical
decision making processes. The Board has adopted several provisions of the ‘Corporate
Governance Voluntary Guidelines 2009’ issued by the Ministry of Corporate Affairs in
December 2009 including constitution of a ‘Nominations Committee’ and strict implementation
of the tenure of Independent Directors in the Company.
8. Corporate Social Responsibility (CSR):
As part of the Essel Group of Companies, the Company has at a unified and centralized level, put
in place a Corporate Social Responsibility (CSR) policy which is based on a belief that a
Business cannot succeed in a society that fails and therefore it is imperative for business houses,
to invest in the future by taking part in social-building activities. During the year under review,
the social activities initiatives undertaken include
Adoption of school(s)/village(s) in tribal areas through Ekal Vidyalaya Foundation, an
NGO that works to bring about basic literacy and health awareness amongst the tribal and
rural population of India;
Supporting the Global Vipassana Foundation which helps propagate Vipassana, the non-
sectarian rational process of self-purification with the aim of bringing about peace both
within the individual and the society in general; and
Supporting the Global Foundation for Civilizational Harmony, a body which aims to
create a peaceful and harmonious society.
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21. 9. Conclusion
This analysis may help someone who wants to invest Zee Entertainment Enterprises Limited. As
per this study investing in Zee is not so risk involved. As their efficiency and liquidity positions
are favorable. Several explanations are possible to analyze in this paper. By comparing the ratios
with the Media and entertainment industry’s ratio we will be able to analyze a perfect picture of
Zee. But the unavailable information and limited data the researcher is trying to analyze the
financial statements and the performance ratios with analysis of Annual reports, to get concepts
of how to analyze.
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22. 10. Annexure:
i. Consolidated Balance Sheet for the years 2011, 2010, 2009.
ii. Consolidated Profit and Loss A/C for the years 2011, 2010, 2009.
References:
Annual Report – 2011
Annual Report – 2010
Annual Report – 2009
http://www.zeetelevision.com/about-us/history-our-story.html
http://www.zeetelevision.com/investor-relations/financials-annual.html
http://www.moneycontrol.com/stocks/company_info/print_financials.php
http://www.moneycontrol.com/stocks/company_info/print_financials.php
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