Mumbai: Indian television broadcasters could see quarterly profits falling or may even post losses on poor advertising sales, high carriage fees and staff cost while regional Sun TV will likely shine amid the slowdown.
A Reuters poll of analysts showed TV Today may report a 46% drop in Jan-March net profit on a marginal fall in sales while TV18 will post losses.
“Broadcasters are likely to be impacted by a slowdown in ad revenues and fragmentation in Hindi GECs (general entertainment channels), indicating a challenging period ahead,” brokerage Edelweiss, which has a cautious rating on broadcasters, said.
Television broadcasters largely depend upon advertisement revenue, which is declining due to an economic slowdown that has badly affected key advertisers - banking and financial services, real estate and automobile sectors.
Analysts expect TV18 to report losses on poor advertising revenues, on reduced ad spends of clients.
TV Today is also expected to be hit by the slowdown, but continued leadership of Aaj Tak, its flagship Hindi news channel, and advertisements from political parties will help it report decent numbers, Edelweiss said in the report.
However, higher expenses on carriage fee due to its continued focus on increasing the reach of its English news channel Headlines Today will squeeze margins, analysts said.
“Visibility on ad revenues is poor as the ad booking cycle has declined from 4 months to 2 months,” brokerage Motilal Oswal, which has a ‘neutral’ rating on broadcasters, said in a report.
While New Delhi Television posted a loss during the quarter, UTV Software saw net profit fall 40% on losses in broadcasting, gaming and new media units. Zee News, too, saw lower profit on poor advertising revenues.
However, analysts were hopeful two big events - the on-going general elections and Indian Premier League cricketing event - will help increase advertising revenues for broadcasters in FY10.
“Advertising slowdown is there. But what is important to know now is how are they strategising their businesses for next year. What new do they plan to do,” an analyst with a Mumbai-based brokerage said.
Shares in TV18 have fallen 21% in the January-March quarter while TV Today have shed 16% compared the CNX midcap index’s nearly 9% drop. The 30-share BSE index has risen 0.6% in the period.
Regional-focussed Sun TV is expected to show a 32% rise in net profit to Rs1.1 billion on a 15% rise in net sales due to an increase in customers onto the direct-to-home platform and recovery from cable operators.
Its margins are, however, seen falling due to higher depreciation in its movie business and a dip in national advertising revenue, KR Choksey said in a report.
“Sun TV is the best placed of the other broadcasters,” the analyst, who did wish to be identified, said.
“Firstly, they have launched new channels, so they are expecting good revenues from there. Then, they are revamping lot of channels and strengthening their inventory levels,” he added.
Sun TV launched two regional kids channel and a Tamil comedy channel recently.
Sun TV shares have fallen 7.7 period in the period, outperforming the CNX Midcap index.