Nifty Media index tanks 5%; Zee Entertainment, Sun TV hits 52-week lows

Shares of media companies were under pressure with Nifty Media index tanked 5% in intra-day trade, hitting 20-month low on the National Stock Exchange (NSE) on growth concerns.

Zee Entertainment Enterprises (ZEEL) and Sun TV Network hits their respective 52-week lows have tanked up to 9%, while Dish TV India, INOX Leisure and Den Networks were trading lower in the range of 1% to 35 on the NSE.

At 09:48 am; Nifty Media, the largest loser among sectoral indices, tanked 5.3% at 2,592, as compared to 0.24% rise in the Nifty 50 index. The media index was trading at its lowest level since December 30, 2016.

Since July 5, 2018, Nifty Media index slipped 14% after Mukesh Ambani-owned Company Reliance Jio announced its Fibre-to-the-home service (FTTH) at Reliance Industries' 41st annual general meeting (AGM). The company started accepting registrations for its broadband service from August 15. On comparison, the Nifty 50 index was up 7% during the same period.

Among the individual stocks, ZEEL has plunged 9.5% to Rs 436 in early morning trade after the media report suggested that the foreign brokerage Morgan Stanley downgraded the stock to 'Underweight'.

“While medium-term business momentum appears good, led by advertising outperformance and supported by digitalization and new initiatives to scale up presence in movies/ digital/overseas/live events, we believe the near-term growth outlook remains uncertain owing to demonetization-led disruption that will weigh on advertising spends for the industry. A subdued viewership rating for the flagship Zee TV channel is another concern,” analyst at JP Morgan said in recent report.

Key downside risks include slower-than-expected advertising revenue growth; market share losses on account of higher competition; higher losses for new media initiatives; and any new investments that could be earnings-dilutive, the brokerage firm said.

ZEEL’s earnings to cash flow conversion during the financial year 2017-18 (FY18) deteriorate to 67% (FY17- 74%) on rising inventories and advances.

“ZEEL’s FY18 domestic subscription business witnessed a growth of 11.8% YoY (adjusted for the sale of Sports business). The growth was a tad lower than the initial expectations on account of two factors. Firstly, due to uncertainty related to TRAI’s tariff order, revenues from the recently digitised markets grew slower than expected. Secondly, during the year, exit of one of the DTH players led to some loss of revenue,” the company said in an annual report.

Sun TV Network too hit a 52-week low of Rs 692, down 4%, extending its 7.5% decline in past two trading days on the NSE. The stock plunged 37% from its 52-week high level of Rs 1,098 touched on January 16, 2018 in intra-day trade.

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