Zee Tele demerges to get focus
Come Monday December 18, Zee Telefilms the Rs 1,400 crore television, cable and entertainment company will cease trading on the stock exchanges. Instead, four new companies demerged from the current will take its place. This move is expected to unlock value for the investors and increase operational focus.
Speaking with FE, Subhash Chandra, chairman of Zee Telefilms and the Essel group asserted, “This is the third phase of the television industry, where focus will be created to serve upcoming demand”.
He expects this demerger to unlock value for investors as they would be able to pick and choose the industry they would want exposure to.
Certain section of analysts believe that the earlier option of investing in Zee Telefilms offered them a better derisked business, earnings from the content business would protect slides in the cable business.
While agreeing to this fact Chandra added, “The combined entity was a bundle of complex systems and many businesses were not performing. The demerger will clear the complexity and allow each to focus on serving its customer group better.”
Chandra’s view is that the industry will move from being broadcast driven to narrow casting technologies. He expects customised content delivery in different formats to specific individual demands dominating the entertainment industry. Entertainment is already moving onto mobile phones and over internet protocol. To cater to this, a demerged a focussed and nimble entity would be required to constantly innovate and deliver value.
To gain from these opportunities, Chandra has mandated each business head to grow by 35% in the next five years, as against the expected industry average growth rate of around 25%. This, he expects, will take the Zee revenue to Rs 14,000 crore by 2011.
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