>TELEVISION EIGHTEEN INDIA LIMITED (FIRST GLOBAL)

Likely implementation of CAS in 2009 to be the key trigger for growth…Emergence of newer delivery platforms DTH & IPTV to drive increase in subscription revenues

Stock appears richly valued in view of intensifying competition in business news space & earnings dilution resulting from proposed rights issue…

THE STORY.....

It is hard to make real cash flow in any business in India (unless you are in politics)…and nothing exemplies this better than the Indian news media space. The sector is awash in red ink, and we really can’t see how this will change quickly, unless India’s stock market starts doubling every three
months (which it just did, in case you didn’t notice), or start having national elections every year
(which is definitely not happening for the next 20 years or so).

TV18 has been an outstanding success when it comes to eyeballs, but cash is quite another matter. To have negative EBITDA margin is quite a feat and TV18 achieved that in FY09.

The bewildering array of new initiatives like the portal, etc., are all really long shots. These will
make some money…eventually. Maybe

Hmmm…now what should one rate a stock like this?

We initiate with a Market Perform rating because no broker can anger a financial news network…

Television Eighteen India Ltd. TLEI.IN/TVET.BO, India's premier business and consumer news broadcaster and leading media content provider, has a presence in television through its two business news channels - CNBC-TV18 and CNBC-Awaaz - and in the Internet space through a number of web portals. Both these channels are dominant players in their respective genres, with the English business news channel commanding a consistent market share of 50% over the last five years, while the Hindi channel clearly dominates over its closest peer with a market share of over 68%. In the Internet space, the company has started/acquired a number of web portals Web 18 and has also launched Forbes Business magazine in India in collaboration with Forbes Media. It has also formed a 50:50 JV with Jagran Prakashan for launching a Hindi business daily in the Indian market, which, however, has been currently being put on hold. The company has been recording strong revenue growth since 2001, on the back of the country’s fast paced economic growth, with consolidated revenues growing at a CAGR of 55.17% over the last five years. However, the initial start up costs for its business news channels and web portals and competition from new channels NDTV Profit and the recent launch of UTV I have taken a toll on TV18’s profitability. The company’s proforma profit declined from Rs.383 mn in FY06 to Rs.63 mn in FY08 and it reported a proforma net loss of Rs.2.4 bn for FY09. Moreover, the fortunes of all business news channels are closely linked to the condition of the capital market, which has been witnessing a downturn for the past one year, though it is now exhibiting some signs of a recovery, post the elections.

In order to fund the company’s mounting losses, working capital requirements and debt repayment, TV18 plans to raise Rs.5 bn through a rights issue. We expect the company’s new ventures, particularly, those in the print media segment and web portals, to continue demanding the infusion of additional capital. On the positive side, the key trigger for TV18’s growth will come from the implementation of the Conditional Access System CAS, which is likely to be implemented by 2009. This, coupled with the emergence of newer delivery platforms, such as Direct-To-Home DTH and Internet Protocol Television IPTV, is expected to result in an increase in the company’s subscription revenues.

To see full report: TV18