Zee-Sony – A Strong Force In The Making: Motilal Oswal

Motilal Oswal Report

The proposed merger between Zee Entertainment Enterprises India Ltd. and Sony Pictures Networks India), which was recently approved by the National Company Law Tribunal, is expected to create a dominant player in the media industry.

A war chest of $1.6 billion (capital infusion) and steady annual Ebitda generation capability of ~Rs 40-50 billion from the linear business should enable Zee Entertainment to compete within the high-growth digital segment and to fund its recent foray into the sports segment.

Further, Zee’s deep understanding of the Indian entertainment market, better bargaining power, and ability to produce a strong line-up of content should allow it to have a strong play within the OTT space.

We believe the current valuations do not fully capture the combined entity’s potential growth catalysts.

While there has been some stability in subscription revenue with the implementation of National Tariff Order 3.0, the persistent softness in the ad market and the company’s decisions on content investment would be the key factors to watch out for.

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