“We need to clarify whether this fundraising is linked to acquisitions or if it’s again related to the promoters,” Roy mentioned, adding that the upcoming board meeting could shed light on the situation.
The new fundraising plan has also rekindled memories of last year’s attempt by promoters to boost their stake via convertible instruments, which ultimately did not receive necessary shareholder approval. Roy believes that investors will keenly observe whether the updated fundraising strategy correlates with promoter ownership or a potential acquisition.
Simultaneously, Zee has made headlines with a significant shift towards sports broadcasting by acquiring FIFA rights for various tournaments over the next eight years. Roy stated that this development allows the company to broaden its total addressable market and addresses a void that was left when Zee exited the sports sector nearly a decade ago.
“Clearly, they are aiming to expand their total addressable market, as sports have been a missing link,” he remarked.
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However, Roy warned that the FIFA agreement should be perceived as a long-term strategic endeavor rather than a short-term earnings booster. He pointed out that most matches will occur during late-night or early-morning hours in India, which could restrict live viewership. Additionally, he noted that football does not draw advertising revenues comparable to those generated by cricket.
While Zee’s long-term strategy may be enhancing, Roy anticipates that short-term market conditions will remain difficult. He noted that ad spending from fast-moving consumer goods (FMCG), consumer durables, and automotive sectors might decline due to profit pressures in these industries.
“In Q1 and Q2, advertising will be weak for the entire media industry, leading to a more negative bias on margins than any positive surprises,” Roy stated.
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Roy continues to hold a buy rating on Zee but advises investors to adopt a long-term perspective. He characterized the stock as a one-year investment rather than a quick trade, with future performance likely hinging on fundraising transparency, promoter involvement, and the company’s capacity to achieve more stable margins.
For now, Zee’s fundraising efforts may garner more interest than its FIFA broadcasting rights as investors seek clarification on why a company with substantial cash reserves requires additional capital in the first place.
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