Tv today networks ltd dr equity oct 2014 Multibagger Pick

TV Today Networks Ltd
Best Media Play
Retail Equity Research
October 2014

TV Today Network HO
www.drequity.in
10/7/2014 2
Unearthing Multibagger Stocks

Content Index
•TV Today Networks Ltd– An Introduction
•TV Today Networks Ltd– Business Overview
• Industry Overview
•Warren Buffett Filters Check
• Concerns
•• CCoonncclluussiioonn
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TV Today Networks Ltd – Investment Highlights
Recommendation: Strong Buy
CMP: INR 210
FV: Rs 5
Market Cap: Rs 1200Cr
BSE Code: 532515
NSE Code: TVTODAY
Bloomberg Code: TVTN:IN
Sector: Media &
Entertainment
Promoter Holding: 57.5%
Total Equity : 29.7cr
Mr Aroon Purie began the India Today Group with an eponymous magazine in 1975. Today the
group is India's most diversified media group with 32 magazines, 7 radio stations, 4 TV
channels, 1 newspaper, multiple web and mobile portals, a leading classical music label and
book publishing arm. Through its subscribers, readers, viewers and listeners, the group reaches
out to over 50 million individuals.
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10/7/2014 4

Introduction
Aaj Tak news channel is the most tuned in channel among Hindi news.
Dominant channel in the highly competitive market.
News content being highly popular among Indian families, stand to gain more popularity as
literacy rates and income levels rises.
As digitisation penetrates the subscription revenues will go up significantly.
Since, TV today caters large Hindi speaking audience, Phase 3 and Phase 4 digitisation roll out
will boost tthhee ssuubbssccrriippttiioonn bbaassee..
There is a huge operating leverage in TV today since most of the cost is fixed in nature so as
the subscriber base increases it directly contributes to the bottom-line.
Aaj Tak is the No.
1 Hindi News
Channel
Strong Ad Growth to
boost bottom line
Huge
Operating
Leverage Play
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Company background
TV Today Network (TV Today) incorporated in December, 1999, is a part of the India Today
Group.
A leading news broadcaster in India.
It operates as a subsidiary of Living Media, the holding company of the India Today group of
publications.
Chairman of Living Media, Aroon Purie, has a rich lineage in the news disbursement business.
TV Today is one of the leading news broadcasters in India with four channels viz. Aaj
Tak, Headlines Today, Delhi Aaj Tak and Tez distributed by MSM Discovery.
TV Today is the first Hindi news channel to go live also the most popular channel for Hindi
news viewers.
In addition, Radio Today Broadcasting Ltd, a fellow subsidiary, merged with the company
extending the presence of TV Today to the radio segment under the brand Oye 104.8 FM.
The company has also made a strategic investment worth | 45 crore in FY10 in Mail Today
Newspaper Pvt Ltd, which publishes a news paper called Mail Today in a bid to enter the print
segment for business scalability.
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Industry Overview
TV Industry grown at 12% CAGR for the period FY08-FY13.
As per FICCI KPMG data industry will grow at 16% for the next 5 years, which will take the
present market size of TV industry of INR 417 crore to INR 885 crore.
TV industry (Household) to rise from currently 161 Million to 191 Million which will boost
bottom line directly.
Channel carrying capacity have increased significantly to 1000 which will hheellpp eeaarrnn mmoorree
revenues in the form of subscription.
Phase I Phase II are almost complete in digitizing and setting up set top boxes.
Phase III Phase IV regions work has been started, once the entire country becomes the
digitized the full benefits will go to the broadcasters, they will enjoy high operating leverage
which will boost bottom-line.
Industry subscription to reach 63000cr by 2018 a exponential rise of 2.2 times.
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Digitization will help broadcaster to get better rates in advertisement.
Also economic recovery will add further steam, which will give exponential returns.
Improved standards of living and increasing literacy rates will benefit news channels
immensely.
Share of the news domain has increased from 6.2% in 2012 to 7% in 2013 this shows the
growing awareness among public.
In India there are 392 news channels out of which Aaj Tak, Zee News, India TV and ABP News
are the major news domain in India.
Interesting point to be noted here is that news segment has 7% viewership share as against
22% revenue share. Also the news channel commands better ads value due to its targeted
customer base.
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Applying BBuuffffeett FFiilltteerrss
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9
Peter Lynch Style
•Simple Business to
Understand
•Clean Financials
•Shareholder
Friendly
Management
Warren Buffett Style
•Strong Moat In the
Business
•Available at
Reasonable
Valuation
•Lot of scope of
Value Creation
Rakesh
Jhunjhunwala Style
•Huge Opportunity
to grow
•Available at
Reasonable
Valuation
•Lot of scope of
Value Creation

Track record of high returns on capital.
Here's what we're looking for...businesses earning ggoooodd rreettuurrnnss oonn
equity while employing little or no debt. - Warren Buffett's letter to
shareholders, 1987
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25.53%
5.67% 4.89%
6.68%
13.54%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Return on Capital Employed
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11
Mar '14 Mar '13 Mar '12 Mar '11 Mar '10
Mar '14 Mar '13 Mar '12 Mar '11 Mar '10
25.53% 5.67% 4.89% 6.68% 13.54%
The best metrics to judge any company’s efficiency is to look at Return on Capital
Employed. Generally it should be 25% on an average for an at par return. In case of TV
Today it comes in exception case, since the company was in loss in the previous years and
now due to digitization and lowering of carriage cost TV today is going to see explosive
growth in its subscription revenue. As we can see for march ‘14 RoCE rose to 25% from
5.67% due to rise in operating profit margin because of rising Subscription and Ad sales.

...else pays it back to shareholders
Most high return businesses need relatively little capital. Shareholders of
such a company usually will benefit if it pays out most of its earnings iinn ddiivviiddeennddss
or makes significant stock repurchases.-Warren Buffett letter to
shareholders, 1992.
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Face Value 5 5 5 5 5
Dividend Per Share 1 0.75 0.75 0.75 0.75
In the last 5 years TV Today has
consistently delivered the dividends. Since
the media industry is at nascent stage in
India, TV Today Networks is growing
10/7/2014
consistently. Digitization is expected to
change the complete landscape of media
sector. The average payout of TV Today
has remained at lower levels in the last 5
years at 16%. We expect as the
digitization penetrates and the
profitability goes up the dividend payout
will increase.
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13

A word on the management.
...the certainty with which management can be counted oonn ttoo cchhaannnneell
the rewards from the business to the shareholders rather than to itself...-Warren
Buffett letter to shareholders, 1993.
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Aroon Purie, Chairman Managing Director
Koel Purie Rinchet, Whole Time Director
Anil Vig
Rajeev Thakore
Ashok Kapur
Mr Aroon Purie
Board of Directors
Devajyoti Bhattacharya
Aroon Purie is an Indian businessman who is the founder-publisher and editor-in-chief of India
Today and the chief executive of the India Today Group. He is the managing director of Thomson
Press (India) Limited and the chairman and managing director of TV Today. He is also the editor-in-
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chief of Reader’s Digest India.
He was conferred the Padma Bhushan, a prestigious and third highest civilian award, by the
government of India, for his contribution to Indian journalism. He has received numerous other
honours which include the B.D. Goenka Award for Excellence in Journalism (1988), 'Journalist of
the Year 1990' award by the Indian Federation of Small and Medium Newspapers etc.

SSttrroonngg MMooaatt
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Does the business has got the Moat?
Yes, TV Today has got the strong moat which has gained channel the No. 1 position in
Hindi news segment for such a long time. It can be seen from content to delivery of
news TV Today is unbeatable.
Strong presence in Hindi news genre: Aaj Tak undisputed market leader
News being non-proprietary and largely non-exclusive in nature, the Content and
coverage is the most important part for any news channel.
In such a case, where the content is highly homogeneous, usually the top one or
two players are kkeeyy bbeenneeffiicciiaarriieess..
Aaj Tak has very well maintained its leadership position in the last decade.
Hence, it has been seeing an exponential increase in its revenue market share.
With a viewership share of ~18.5% in the Hindi news segment and ~8.7% of the
overall news segment, Aaj Tak commands an impressive 23% (as per FY13) of Hindi
news and 9.2% of overall news advertisement revenues.
This signifies advertiser’s preference for Aaj Tak in a fiercely competitive segment
populated with 392 news current affair channels.

According to Census 2011, around 41.0% of the Indian population speaks Hindi,
followed by Bengali (8.1%), Telugu (7.2%), Marathi (7%) and Tamil (5.9%).
The presence of Aaj Tak in the Hindi news genre dates back to 1995 when it used to
broadcast a 20-minute news programme in Doordarshan.
Aaj Tak gained immense popularity through Doordarshan.
Hence, it was launched as a 24 hour channel in 2000. Owing to its news credibility,
quality live feeds and the ability to bring news at the earliest it was soon able to
dominate the Hindi news genre.
It has remained the No. 1 channel in the Hindi news category ever since the launch.
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18
Other news channels like ABP News and India News are its key competitors.
The revenues of TV Today have grown at a CAGR of 12.4% in FY12-14.
Aaj Tak contributes more than 90% of revenues in TV today, however the other
channel will start contributing in revenues now as Headlines today the English news
channel has shown good growth in ad sales.

Huge Opportunity
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Operating Leverage to play pivotal role, bottom line to go up multifold
Digitisation has helped in increasing the channel carrying capacity from 80 channels
earlier to 1000 channels now.
This has helped in reducing carrying cost to reduce especially benefiting news
channels since they have to pay higher carrying cost.
News broadcasters shell out about 25-30% of their total revenue in the form of
ccaarrrriiaaggee aanndd
placement fees. English news channels spend approximately 70% of their distribution
costs as carriage in the metros and are yet to receive an equivalent benefit in terms of
subscription from the metros.
Promotion and distribution cost which include the carriage cost have declined from
87 crore to 81 crore for FY12 to FY14.
Management is quite confident of declining carriage cost further in the future which
will help to increase the profitability of TV Today.
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84 87 84 81 79 74
29 28 27
21 17 14
100
80
60
40
20
0
1 2 3 4 5 6
Advertising
Distribution
As a % of Sales
Declining advertisement and distribution expense on account of lower carriage fees
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21
Source: Company, Industry, Dr Equity Research

Radio Business
Radio Today Broadcasting Ltd, a fellow subsidiary, merged with the company
extending the presence of TV Today in the radio segment under the brand Oye 104.8
FM
The company has a presence in the six cities of
Mumbai, Delhi, Kolkata, Amritsar, Jodhpur and Patiala
Radio business is not able to keep pace with the competitors in the past and
continues ttoo ssttrruuggggllee..
Radio industry size is approx 1300 cr expected to become 3500 cr by 2018.
Oye 108.4 FM contributes very miniscule 4% to the total revenues of TV Today.
Management is waiting for the govt nod for live news feed from there popular channel
Aaj Tak on there radio channel Oye 108.4 FM.
We expect radio business to grow at slower pace in the future as well.
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TV Today Synonym for TRUST
News Business is very different business as compared to any other business. Since
the content remains more or less same but what makes the news channel great is the
Authenticity and the loyalty from its viewers.
These two things have bee maintained by the TV Today for the 10 years in a row.
They have always make an impact whenever there is any national coverage or big
news, and this makes huge impact on shaping the image of any news channel.
Although there are big corporate with there deep pocket are involved in the business
like ZEE News, ABP News and ETV.
But its the quality and reliability which makes the news channel more popular and
TV Today practices that very religiously well.
Mobile Internet Penetration to aid growth
India is currently witnessing humongous growth in the data revolution, Good for the
content rich broadcasters.
Currently there are 232 million internet users in India which holds strong growth for
the news platform like TV Today.
TV Today can fetch good advertisement rates due to vast reach especially through
mobile applications. This aids another stream of revenue for TV Today in the future.
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Two main sources of revenue for the broadcasters are - Advertisement Revenue and
Subscription Revenue. Since the Company is in the News genre, the primary source of
income for your Company is Ad sales revenue.
The ad spend on a channel depends on its market share, reach and the credibility and popularity
it enjoys with the consumer. The leadership position of Aaj Tak as the No.1 news channel has
contributed to the growth in advertising revenue. The Company’s 24 hour English News channel
“Headlines Today” and Hindi News channel “Tez” catering to the upmarket urban population
and Metro centric channel “Dilli Aaj Tak” have also contributed to the revenue growth of
the Company in the financial year ended 31st March 2014 and are expected to further
contribute for the Company in the coming years. The Company is constantly investing in the
content as well as distribution on the basis of detailed research in order ttoo aacchhiieevvee bbeetttteerr
ratings.
With the increased penetration of digitisation including new platforms like DTH and IPTV, TV
Today is expected to benefit from increased subscription revenue through more transparency
and addressable reporting of subscription revenues.
TV Today also partners in the digital consolidation with the other group Companies to have an
edge on digital technology besides considering the potential opportunity in regional space and
leveraging the Groups strength in few other media platforms like Hindi newspaper etc.
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TV Today will witness exponential
growth in its subscription revenues
once industry fully shifts to cost per
subscriber model.
Consumers look for the brand and a
reliable channel for daily news.
Especially the way TV Today reports
the news with its accuracy has
immensely benefited them.
The No. of TV HHoouusseehhoolldd iiss aallssoo
expected to grow from 161 million
currently to 191 million in 5 years.
Increasing literacy rates and standard
of living, people want to be updated
all the time. Share of total news
domain in the overall break up has
increased from 6% to 7% in last 5
years.
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Source: Mc Kinsey
www.drequity.in

270 271
340
410
450
31 31 33 35 37
500
450
400
350
300
250
200
150
100
50
0
2012 2013 2014 2015E 2016E
Ad Rev
Subs Rev
Advertisement Revenues Subscription Revenues
Breakup of Viewership Share (%)
2.78
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11.93 3.18
30.01
0.14
0.23
27.9
3.65
20.18
Hindi Movies
Hindi News
Hindi GEC
English Entertainment
English News
Others
Regional Movies
Regional News
Regional GEC
2012
15.1
3.3
30
0.1 1.1
25.4
3.4
3.6
18 Hindi Movies
Hindi News
Hindi GEC
English Entertainment
English News
Others
Regional Movies
Regional News
Regional GEC
2013
Source: Ficci KPMG

Declining distribution expenses
Increasing subscription revenues
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27
Source: Ficci KPMG

and now Valuations...
“John Burr Williams set forth the equation for value,
which we condense here: The value ooff aannyy bbuussiinneessss
today is determined by the cash inflows and outflows -
discounted at an appropriate interest rate - that can be
expected to occur during the remaining life of the
asset.” -Warren Buffett‟s letter to shareholders, 1992.
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10/7/2014 28

Earnings Power Value (EPV)
The formula for EPV of a company is:
EPV = Adjusted Earnings x 1/R
Here, ‘R’ is the cost of capital.
TV Today posted an adjusted EPS (earnings per share) of Rs 10.31 in March FY14. If the
company’s profits were to stagnate and remain at Rs 10.31 per share going forward, and
applying the EPV formula here, we multiply Rs 10.31 with 1/12.5% (8% being my assumption for
the opportunity cost of capital) The reason we chose this number is because this would take the
earnings yield to 8% (inverse of 12.5), similar to what one would expect from aa 1100--yyeeaarr IInnddiiaann
government bond.
This gives us a value of Rs 82.48 per share, which is TV Today intrinsic value as per the EPV
calculation.
Applying 3x multiple* to the above price gives us the approx intrinsic value of INR 247/share.
*3x times multiple is taken since TV Today is a growing franchise and its earnings are not going to stagnate at least for the
coming 10-years.
Un-Earthing Multibagger Stocks
March 2011 29
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Margin of safety
Having ascertained that TV Today Networks Ltd is one of the contenders for
becoming a part of a portfolio that Warren Buffett would love to oowwnn,, lleett uuss hhaavvee aa
look whether there is sufficient margin of safety in the company's current stock
price and whether one should invest in the stock at the current levels.
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10/7/2014 30

Margin of Safety
Buffett always insist on the Margin of Safety of 25% from the current share price. Because an
analyst can go wrong in estimating the fair value of a company. That is why Buffett always look
for a fair amount of Margin of Safety.
TV Today's current share price stands at Rs. 210, while Fair Value comes at Rs. 247. So there is a
margin of safety exist in the current share price.
There is a 18% undervaluation calculated at the current price compared to its fair valuation
which offers a reasonable level of Margin of Safety.
Un-Earthing Multibagger Stocks
March 2011 31
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Risk Concerns
12 Minute TRAI Ad cap Implementation could be a spoil Sport to the overall revenues
Trai had mandated a 12 min ad cap implementation on all the broadcasters. However the
loss can be made up by increasing the ad rates. Currently TV Today has a 18 min ad per hour
and have to reduce the inventory by 33% in case of implementation.
However the NBA (News Broadcaster Association) had challenged this mandate, in case of
adverse scenario the broadcasters have to reduce ads per hour to 12 min.
Moreover digitization in phase 3 phase 4 are yet to penetrate in such a case 12 min ad cap
is unlikely to happen. Also news channels are more dependent on ad revenue, to accrue the
full benefits of digitization in subscription revenues chances of implementation of 12 min ad
cap seems bleak.
TV Today's subscription revenues continues to lag behind as compared to its peers due to its
non presence in to regional markets.
There is a delay in the digitization roll out by the government but that will be done sooner
rather than later.
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10/7/2014 32

We expect revenues of TV Today will increase from here due to faster economic
recovery, advertisement growth and expanding subscription base. There is a risk involved in 12
Minute TRAI Ad cap. In such a scenario it will hit the advertisement revenues of the channel due
to lesser ad in an hour. Channel will increase there ad rates to compensate the loss but how far
they can increase only time will tell.
Lacks in Scale and new Cannel Launches
TV Today major revenue comes from only 1 channel which is Aaj Tak. They have no regional
presence as well. This reduces there bargaining power with the advertisers. There competitors
are having good regional presence.
Reputation Risk
Paid news is the biggest risk any news channel suffers from. In case the past tthheeyy hhaavvee bbeeeenn
associated with such allegations which possess them with reputation at stake in the market.
Competition Risk
Hindi news channel saw a lot of new players entry i the last 5 years. Aaj Tak faces huge
competition from Zee News, ABP News, India News etc. Any change in the audiences can
hamper the revenues stream significantly.
Digitization delay
Delay in digitization roll out can hamper the ongoing growth in the business. Although the
complete digitization will result in to huge operating leverage which will significantly bring down
the ca10r/r7i/a2g01e4 cost and will add to the bottom www.line drequity.in
multi fold. 33

Conclusion from Head Equity Research
Looking at the industry structure and the business model, we have arrived at the conclusion to
buy this gem.
This company possess enormous competitive advantage which can be evident from the analysis.
Management is clean and clear in there vision and integrity.
At this level share price gives us enough margin of safety and the way company has grown in the
past if it continues to do same it will create huge wealth for all tthhee ssttaakkeehhoollddeerrss..
Dr Equity,Cerebral Advisory Services Pvt Ltd
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10/7/2014 34

Shareholders with more than 1% stake
Name Of Shareholder
No. Of Shares
held
Shares as a % of Total No. Of
Shares
Reliance Capital Limited
4617153
7.75
Franklin India Smaller Companies Fund 948291 1.59
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35
Life Insurance Corporation of India 926463 1.56
Damani Estate Finance Pvt Ltd 896000 1.50
Ramesh Damani 819686 1.38
Total 8207593 13.78
Source: BSE India

Disclaimer
1. Any action you choose to take in the markets is totally your own responsibility.
2. Cerebral Advisory Services Pvt Ltd (Dr. Equity) will not be liable for any, direct or indirect, consequential or
incidental damages or loss arising out of the use of this information. Information in this report is believed to be
correct reliable. Information data in this report is been taken from publicly available data. We do not
guarantee correctness of Information.
3. Stock market Investing may result in losses as well as profits. Stock Investing is not suitable for many members
of the public and only risk capital should be applied.
4. Cerebral Advisory Services Pvt Ltd (Dr. Equity) does not take into account special investment goals, the financial
situation or specific requirements of individual users.
5. You should carefully consider your financial situation and consult your financial advisors as to the suitability to
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your situation prior to making any investment or entering into any transactions.
6. If you want personal advice, then you should seek a registered investment advisor.
7. Price and value of the investments referred to in this material may go up or down.
8. This service does not assure specific amount or percentage of return and it does not guarantee number or
periodicity of recommendations either.
9. Investment / disinvestment decisions are entirely at the discretion of the subscribers and the entire
gains/losses are theirs. Hence, Cerebral Advisory Services Pvt. Ltd. or any of its employees will not be liable for
any loss suffered. (CASPL – Cerebral Advisory Services Private Limited)

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Tv today networks ltd dr equity oct 2014 Multibagger Pick

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