Optimistic about ad growth in coming quarters: Punit Goenka

Zee Entertainment Enterprises Ltd (ZEEL) is beginning to see the first signs of a turnaround in advertising revenues, even as softness in FMCG spends continues to weigh on the market, CEO Punit Goenka said during the company’s Q3 earnings call.

“Our business is largely dependent on FMCG. Any improvement in that sector has an immediate impact on our business,” Goenka said, adding that while year-on-year advertising revenues remain under pressure, the company has witnessed a “significant improvement” on a quarter-on-quarter basis.

Advertising revenues rose 6% sequentially in Q3, even though they were down 9% year-on-year, reflecting what management described as a slow but steady recovery.

Goenka also noted that advertiser categories beyond FMCG are starting to contribute, offering some diversification to the revenue mix.

Crucially, he stressed that advertising growth will go “hand in hand with the margin structure,” underlining that ZEEL is already operating at a highly optimised cost base.

“While we are optimistic about our advertising growth in the coming quarters, but it will go hand in hand with the margin structure because I think our cost structure is pretty much at the leanest that it possibly could be in order to keep our market share etc. at the levels that we have been operating at,” Goenka said.

Management also highlighted that headcount and personnel costs are among the most competitive in the industry, with further optimisation continuing where overlaps between linear and digital operations have made certain roles redundant.

Against this backdrop of cautious ad recovery and disciplined cost control, ZEEL signalled a key inflection point in its digital business. The management confirmed that streaming platform ZEE5 has now broken even.

“Over the last three quarters, we have been growing on a sequential basis of close to about 30% in ZEE5,” he said, calling the breakeven milestone an important factor in the company’s evolving growth story.

The digital momentum is being reinforced by gains in the linear TV portfolio.

ZEEL reported a 60 basis-point year-on-year increase in network viewership share in Q3, taking it to 17.5%. Zee TV continued to post strong GRP growth, while Zee Bangla regained leadership in the eastern market. In the South, ZEEL emerged as the fastest-growing network with a 17.7% share, and Zee Marathi touched a dominant 33.6% market share, reflecting strong consumer response to its refreshed content slate, said CFO Mukund Galgali.

Operating costs rose 12% quarter-on-quarter, primarily due to higher programming expenses linked to the preponement of ILT20 cricket matches and acquisitions of big-ticket titles such as Kantara Chapter 1 and Akhanda 2. Excluding these one-offs, overall operating costs would have declined in the mid-single digits, management said.

The company also confirmed that it has deferred further drawdowns under its FCCB programme. “Unless we have full visibility on the deployment of those proceeds, we are not going to go for any drawdowns,” it said, signalling a cautious approach to capital raising.

On the long-running Star arbitration, management said proceedings have been adjourned to July following confidentiality-bound developments disclosed by Jio. The verdict is now expected after the July hearing, though the timing remains uncertain.