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Sunday, May 26, 2013

Zee offers 1:21 bonus of redeemable pref shares

This story first appeared in DNA Money edition on Thursday, May 23, 2013.

Zee Entertainment Enterprises Ltd offered a novel bonus to shareholders as part of its celebration for the completion of 20 years of the Zee brand as it reported a 10.7% year-on-year growth in net profit for the fourth quarter at Rs 180.4 crore.

The Q4 performance was driven by strong advertising and subscription revenues, which grew 15.5% and 13% at Rs 479.2 crore and Rs 454.6 crore, respectively.

Net profit for the full fiscal rose 21.6% at Rs 718.2 crore, while advertising revenues increased 24% at Rs 1,963.9 crore and subscription revenues 22.6% at Rs 1,623.4 crore.

Subhash Chandra, chairman, Zee, said, “The recent policy initiatives by the government and further reforms should help boost business sentiment and improve the investment climate. Despite the backdrop of a slowing economy in the last fiscal, television media industry has continued on its growth path.”

The company’s  board has recommended a cash dividend of Rs 2 per share to celebrate the completion of 20 years of brand Zee.

In a unique approach to rewarding shareholders, the company board also announced distribution of Rs 2,000 crore through bonus issue of redeemable preference shares.

Atul Das, chief strategy officer, Zee, said that equity shareholders will be issued 21 preference shares of Rs 1 each for every one equity share held by a shareholder.

“It carries a dividend coupon of 6% per annum, which implies that every year on this amount shareholders will get 6% dividend and it has a tenure of eight years. Fourth year onwards, every year the company will redeem one-fifth of the nominal value of these preference shares,” said Das.

So for instance, taking Rs 2,000 crore as an approximate number, fourth year onwards Rs 400 crore will be paid back to the shareholders.

“It’s a committed pay to the shareholders. It’s basically setting out the agenda that the investor will receive the payouts every year till the tenure of these shares gets over,” said Das.

Consolidated operating revenues for Q4 rose 11% at Rs 964.3 crore. Operating profit for Q4 rose 51.4% at Rs 242.3 crore, while  Ebitda margin stood at 25.1%. Operating profit for the full last fiscal rose 29% at Rs 954.3 crore, while total revenues rose 21.7% to Rs 3,699.6 crore.

Punit Goenka, managing director and chief executive officer, Zee, said the fiscal 2013 has been good —  both on operating as well as financial parameters.

“Zee gained viewership share with improvement across genres, both in national and regional languages, which led to outperformance in advertising growth relative to industry.

We have also seen steady improvement in our sports business over the last three years.

While investment in sports continues, performance has improved substantially with better monetisation from subscription.”

The company board has also approved enhancement of FII investments in the company beyond the current limit of 49% up to the maximum sectoral limit allowed under applicable foreign direct investment regulations, subject to appropriate approvals.

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