A local brokerage house has valued Star India, the Indian subsidiary of 21 Century Fox controlled by American media tycoon Rupert Murdoch, at $14.3 billion (Rs 97011.2 crore at Monday’s exchange rate of 67.84 to one US$) despite the company reporting losses in its spots business.
As per this valuation done by Edelweiss Securities Ltd, Star India, if gets listed on the stock exchanges could turn out to be India’s largest media company.
“As per our calculations (based on publicly available data), if Star gets listed on the bourses, its Enterprise Value (EV) could potentially be $14.3 billion and become India’s largest media company,” Edelweiss Securities Ltd said in a report.
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At this valuation, Star India is more than double the market cap of Zee Entertainment Enterprises Ltd, which is India’s largest listed media entity.
“We have valued Star on SoTP (Sum of The Parts) basis. We have valued Star’s entertainment segment at 33x FY16E EV/EBITDA versus Zee’s entertainment business which is available at 30x FY16E/EBITDA in FY16,” the Edelweiss analysts said in the report.
Star’s entertainment business has been valued at Rs. 63360 crore. While its recently introduced Hotstar business has been valued at Rs. 10245.2 crore and the Sports business has been valued at Rs. 18000 crore.
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“We assign 0.9x to the investments (worth Rs. 20,000 crore) done by Star in Sports business,” the analysts said.
All these put together the total valuation works out to be Rs. 91605 crore and at an exchange rate of 64 to a dollar, Star India’s valuation has been quantified at $14.3 billion by the brokerage.
However, when The Hindu attempted to speak to the main analyst of this report on more clarity on the valuation front, he initially did not respond to text message and then refused to say anything.
A query to Star India Chief Executive Officer Uday Shankar remained unanswered.
Other independent analysts also did not offer any comment by stating they have not studied Star India’s balance sheet and operations in detail.
Star entered India with its maiden channel namely Star Plus in 1992 in a joint venture with Zee showing only international content.
However, both parted ways and Star introduced a 100 per cent owned General Entertainment Channel (GEC) in 1997. By 2001, it became India’s number one Hindi GEC.
In 2004 Star introduced Star One which has been rebranded as Life OK. Then it ventured into Bengali and Marathi language channels. It also forayed into several other language channels through acquisitions.
In sports, Star India has eight channels. The company has earmarked Rs. 20,000 crore towards expansion of sports coverage and building new leagues such as Pro Kabaddi League, Indian Super League for football, the Hockey India League and Indian Badminton League, the report said. Star India also has the distinction of broadcasting cricket in six languages namely English, Hindi, Malayalam, Kannada, Bengali and Tamil.
However, this business is loss making. Due to this, the company’s EBITDA margin has fallen from 21 per cent in FY10 to 9.4 per cent in FY14. The report has not mentioned the quantum of losses. But it says that Star India, which is expected to report $300 million EBITDA in its entertainment business in FY16 would re-invest 100 per cent of the profit to build the sports business.
Star unveiled Hotstar, its mobile and online entertainment property for TV shows, movies and sports content, in early 2015. Having enhanced its focus on digital platform, Star through Hotstar is offering 40,000 hours of content in eight languages.
“In OTT (over-the-top content), we believe Hotstar will continue to be based on advertising revenue model over medium term. We expect Hotstar to report revenue of Rs 1000 crore in FY20. We have valued the Hotstar business using 15x EV/sales at FY20,” the Edelweiss report said.
According to the report, the growth in Star’s subscription revenue, higher earnings from its regional channels and the acceptance of its Hotstar service will be the main revenue drivers in the future.
The recent acquisition of Maa Telugu channel will enhance Star’s presence in South India, it said.
Currently, Star India broadcasts through 51 channels in eight languages and enjoys 22 per cent market share at an aggregate level.