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3QFY25 Preview: No respite

Urban consumption slowdown, fledgling rural recovery and a likely sequential down-tick in FMCG’s volume growth point to a still languid demand environment for broadcasters. Festive demand in October fizzled out quickly, reflecting underlying weakness. We expect 4-5% YoY decline in ad-revenues of ZEEL/SUNTV in 3Q, tracking recent trajectory. Pricing-led mid-single digit subscription growth should however help offset lower ad-revenues, driving (2)-2% YoY revenue growth for broadcasters. While that is hardly surprising, a bigger (negative) surprise could be an underwhelming performance by PVR-Inox. We estimate c.6ppt QoQ decline in PVR-Inox’s box-office market share, resulting in a mere 2% QoQ growth in revenues. Regional movies contributed 52% to Q3’s BOC (+13ppt QoQ), per our estimate, where PVRInox has lower share. That said, a c.30% QoQ growth in GBOC, led by INR 14bn India collection by Pushpa 2 alone, is encouraging. It highlights an undiminished allure of theater viewing, in our view, provided the right content. A strong pipeline of Hollywood/Bollywood content in CY25 (Exhibit-8) should help. In gaming, Nazara’s recent acquisitions would mask an otherwise sluggish organic revenue growth (-16% YoY). ZEEL remains our preferred pick in the sector on low valuation and improving operations

* Zee: We expect Zee TV to report revenues of INR 20.83bn, +2% YoY, net of -4%/+7% YoY growth in Ad/Subscription revenues. Festive green shoots in Oct notwithstanding, a soft Nov/Dec means ad-revenues trajectory may not invert in 3Q (-4% YoY decline). Subscription revenues growth should continue, albeit moderate as post NTO 3.0 price hike is now in the base. Other sales and services will see marginal uptick on a favourable comp, though no tent-pole release would cap absolute revenues. We expect EBITDA margin to decline 150bps QoQ. Higher marketing spend, two month incremental impact of wage hike and sluggish revenues will likely weigh on margins. Decision on a formal payout policy and capital allocation plan post recent fund-raise will be key monitorables.

* Sun TV: We expect Sun TV’s ad/subscription revenues to grow -5%/+3% YoY, in-line with ZEEL’s trend. No major movie release mean movie revenues will decline sharply (- 45% QoQ), though will likely be flat on YoY basis. Overall, we expect Sun TV to report INR 8.7bn of revenues, down 2% YoY. We estimate 59.7% reported EBITDA margins, +100bps QoQ, on lower movie business. SA20, South Africa’s T20 cricket tournamnet in 4Q, IPL in 1QFY26 and Rajnikanth’s movie in 1QFY26 should provide growth impetus. But any meaningul trigger will come only when the core business environment improves, in our view. Decision on cash utilisation (special dividend; acquisitions) will be key to watch.

* PVR-INOX: India’s BOC was c.INR 39bn in Q3FY25 (JMFe) vs INR 29bn for 2QFY25 led by Pushpa 2. However, 6ppt decline in PVR-Inox’s share (JMFe) is likely to limit flow through to PVR-Inox’s revenues. Three factors explain lower revenues. One, its share in regional language cinemas is substantially lower (10-15% vs 35-40% for Bollywood). Two, Massappeal of cinemas such as Pushpa 2 means a lot of admits go to single screen theaters. Three, longer duration of Pusha 2 (3.5 hours) results in lower average number of shows/day, limiting absolute admits. Tent-pole content like Pushpa however helps drive higher ATP/SPH. Overall, we expect 2% QoQ growth in revenues (+6% YoY). Pre-Ind AS EBITDA margin should expand to 13.9%, resulting INR 527mn PAT. 3Q performance is underwhelming, especially given a strong Qtr-beginning outlook. But CY25 content pipeline is healthy with a number of Hollywood and big-name Bollywood movies slated to release. That, along with recent correction (-17% in past 1 month), keeps us constructive.

* Nazara: We estimate Nazara to report a 29% YoY revenue growth in 3QFY25. Organic growth will however continue to decelerate. We expect -16% YoY organic growth (exFreaks4U, Fuse Box and S&T). Kiddopia is unlikely to see trend reversal. eSports will likely be impacted by cancellation of NH7 Weekender event. Freemium/RMG remains stressed. We expect EBITDA margin to expand by 100bps YoY to 12.8%, again led by higher margin acquisitions. Update on integrating new acquisitions (PokerBaazi) and utilisation of recently raised funds are key monitorable.

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