Den Networks Ltd.

BUY
Target Price `210
Index Details Sensex Nifty BSE 100 Industry 17,633 5,348 5,341 Cable TV

CMP `124

FY14 PE 17.6x

Scrip Details Mkt Cap (` cr) BVPS (`) O/s Shares (Cr) Av Vol (Lacs) 52 Week H/L Div Yield (%) FVPS (`) 1,638 61 13.3 0.4 130/35 0 10.0

We initiate coverage on Den Networks Ltd (DEN) as a BUY with a DCF valuation based Price Objective of `210. At CMP of `124, the stock is trading at 21.5x and 17.6x its estimated earnings for FY13 & FY14 respectively, representing a potential upside of ~70% over a period of 18 months. Being the only profitable MSO with a market share of 12% and a subscriber base of 11mn, DEN is well poised to benefit from the ongoing digitization wave in the cable industry. We expect revenues to grow multifold as the LCO will no longer be able to under report the subscriber base. We expect revenues and earnings to reach to `1,280.9 crore and `93.4 crore in FY14 from `714.3 and `14.6 crore in FY12 respectively.

Shareholding Pattern Shareholders Promoters DIIs FIIs Public Total % 53.8 2.5 8.5 35.2 100

Digitization is expected to be the turning point for the struggling cable industry. The cable industry has been characterized by drastic under reporting of subscribers leading to substantial revenue losses not only to the broadcasters & MSOs (Multi System Operators) but also the GoI (Government of India) in the form of lost taxation. With Digitization gradually replacing the analog distribution system, the entire universe of subscribers will now be uniquely recognized leading to a multifold jump in the paying subscribers for MSOs. This would lead to a quantum jump in the revenues for the MSOs and broadcasters, besides paving the way for the launch of higher value added services like premium content, high definition offerings and broadband services.

DEN well poised to benefit from digitization

DEN is expected to be one of the biggest beneficiaries of this Digitization. Although the full impact of the revenue benefit would be felt FY15 onward, nevertheless in the interim, the impact on revenue and profitability is expected to be substantial. Post digitization, DENs entire ~11 mn subscriber base (as against the reported number of ~1.4 mn) is expected to start contributing to the revenues. We expect DENs subscription revenues to grow multifold to `853.8 crore by FY14 from `262.34 crore in FY12.

Den Networks. vs. Sensex

Key Financials (` in Cr) Net Y/E Mar EBITDA Revenue 2011 606.6 136.1 2012 714.3 134.0 2013E 936.4 259.1 2014E 1280.9 308.6

PAT 37.5 14.6 76.7 93.4

EPS 2.8 1.1 5.8 7.0

EPS Growth (%) 28.4 -61.1 426.1 21.8

RONW (%) 4.8 1.8 8.7 9.6

ROCE (%) 13.1 11.3 20.3 21.3

P/E (x) 43.5 112.9 21.5 17.6

EV/EBITDA (x) 11.7 11.9 6.2 5.2

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STOCK POINTER

Digitization- The game changer

Distribution JV Media Pro to facilitate better negotiation power

In its initiative to grow through partnership, Den Network and STAR India Ltd formed STAR DEN, a strategic 50-50 Joint Venture (JV) for the distribution of TV channels and services in India. To further reinforce STAR DENs visibility and ensure a better negotiation power aided by a strong bouquet of channels, the company formed a JV with Zee Turner Ltd in May 2011 called Media Pro Enterprise India Private Limited. DEN is a participant in this JV through its 50 percent stake in STAR DEN.

Valuation
At a CMP of `124, the stock is trading at 21.5x and 17.6x estimated earnings for FY13 and FY14 respectively. MSOs are expected to be the biggest beneficiaries of digitization as revenues will no longer be under declared by the MSOs. We believe DEN with a market share of 11% and a subscriber revenue base of ~11 mn is well equipped to meet the digitization deadlines for Phase I and Phase II cities. We initiate coverage on Den Networks Limited as a BUY with a price objective of `210 representing an upside potential of ~70% over the next 18 months.

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 Company Background
Incorporated in 2007, Den Networks Ltd (DEN) is one of the largest Multi System Operator (MSO) in India reaching ~11 million households across 13 states and 88 cities. The company is engaged in distribution of television channels through analog and digital mode and broadband services. The company has major presence in Delhi (NCR), Uttar Pradesh, Rajasthan, Maharashtra, Gujarat, Karnataka, Haryana, Madhya Pradesh and Kerala amongst others. Presently, DEN has controlling stakes in 84 MSOs across its markets. Cable Industry in India

Source: Industry, Ventura Research

Market share of various players

Dens Geographical Presence

9% 12% 49% 9% 9% 10% 2%

Hathway Incable WWIL Unorganised Sector Den Networks Digicable You Broadband

Source: Den Networks, Ventura Research

Source: Den Networks, Ventura Research

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 Key Investment Highlights Digitization- The game changer

Digitization is expected to be the turning point for the struggling cable industry. The cable industry has been characterized by drastic under reporting of subscribers leading to substantial revenue losses not only to the broadcasters & MSOs (Multi System Operators) but also the GoI (Government of India) in the form of lost taxation. With Digitization gradually replacing the analog distribution system, the entire universe of subscribers will now be uniquely recognized leading to a multifold jump in the paying subscribers for MSOs. This would lead to a quantum jump in the revenues for the MSOs and broadcasters, besides paving the way for the launch of higher value added services like premium content, high definition offerings and broadband services. MSOs to benefit from growth in television households and increased C&S penetration
200 180 160 140 120 100 80 60 40 20 0

188
146

mn households

89%

138

76%

73% 2010 2011 2016E

90% 88% 86% 84% 82% 80% 78% 76% 74% 72% 70%

Television households (mn) Paid C&S Penetration of TV households % (mn) (RHS)

Source: FICCI KPMG 2012, Ventura Research

Under declaration of revenues to be eliminated

Currently, the analog market is highly unorganized with over 1000 MSOs and 60,000 LCOs (Local Cable Operators) servicing the 146 mn strong Indian TV households. As per the existing structure of broadcasting, the content is passed on to the LCOs by the MSOs via cable who further distributes the channels to the consumers. This results in the LCO having singular access to the consumer and the analog system ensures that there is no way for the MSO to have a clear understanding on the number of subscribers who are enjoying its services. This has resulted in a significant under reporting of the total subscriber base leading to severe revenue leakages for not only the broadcasters and MSOs but also the exchequer. The extent of this under reporting is so Source: that Networks,the total market size of `18,000 crore, revenues to the extent of large Den out of Ventura Research only 15% are actually realized.
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Key Highlights of TRAI Tariff Order & Interconnection Regulations for Digital Addressable Cable TV Systems
Basic Tier Since, the consumer is required to pay for Free to Air (FTA) channels, concept of Basic Service Tier (BST) has been introduced. The BST is priced at `100 max (+ taxes) per month. However, it is not compulsory for the consumers to subscribe the BST and the consumer can select his own 100 FTA channels in the BST. Minimum Pay TV package A pay channel package will cost atleast `150 per month. Minimum 500 channels st MSOs must carry a minimum of 500 channels from 1 January, 2013. Uniform Carriage Fees MSOs can declare their own carriage fees for any channel that the MSO has not asked the broadcaster for. Carriage fees cannot be increased for two years. No demanded placement Broadcasters cannot insist on placement of their channel in a particular slot. MSO LCO Revenue Share In case mutual negotiations for revenue share between the MSO & LCO fail, the revenue share shall be 55:45 (MSO : LCO) for BST or FTA channels. 65:35 (MSO : LCO) for Pay channels & their bouquets Compulsory a-la-carte by broadcasters Every broadcaster must offer all its channels to MSOs on a-la-carte basis. The broadcaster cannot compel any MSO to include its channels in any package or scheme offered by the MSO.

Source: Industry, Ventura Research

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Come digitization and control shifts from LCO to MSO

However with the onset of the new Digitization Bill, a radical change in the way the C&S industry operates will take place. This will lead to the MSO gaining increasing control over the network and the use of smart technology (Set Top Box equipped with a Conditional Access Card at the customers end & SMS Subscriber Management System) will ensure that all revenue leakages are plugged. However, the full impact of this is expected to be felt only from FY16 onwards once the seeding of the entire ecosystem with STBs (Set Top Box) is completed (in line with road map laid down by TRAI). Roadmap to Digitization
Phase I II III IV Geographies Covered Delhi, Mumbai, Kolkata and Chennai All cities with population > 10 lacs All urban areas (municipal areas) Rest of India No of C&S Households ~12 mn 30-40 mn ~ 20 mn ~ 20 mn Deadline 31-Oct-12 31-Mar-13 30-Sep-14 31-Dec-14

Source: Den Networks, Ventura Research

Once each phase of digitization is implemented, each user in the network will be identifiable to the MSO, consequently driving away the prevailing under declaration and resulting in a multifold increase in revenues for the MSOs. The MSO will control the infrastructure and the role of a LCO will be limited to the extent of a collection and servicing agent of a MSO. MSO & Broadcasters Share to grow multifold post digitization
Stake-holder revenue share Pre-digitization Consumer ARPU LCO Distributor MSO Broadcaster
Source: FICCI KPMG 2012, Ventura Research

Post 2016 100% 35-50% 0.5% 25-30% 30-35%

100% 65-70% 5% 15-20% 10-15%

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Enhanced channel carrying capacity to result in greater choice to consumers

As of 2011, there are more than 600 channels broadcasted in India. The prevailing analog regime has a capacity of carrying only ~90 channels and the customers do not have the liberty to choose the channels. Thus, customers are forced to view the channels the MSO broadcast and the broadcasters have to pay the MSO placement and carriage fees for relaying their content. However, under digitization this is all set to change. Under digitization the MSOs are required to carry 500 channels by January13. This will not only provide the consumers access to a larger number of channels but the consumers will also be able to experience other value added services like video on demand, video recording facility, a la carte facility and high ARPU High Definition (HD) services. No of channels in India
700 623 600 500 400 308 300 200 130 100 29 55 263 200 363 461 552

170 66
75

5 0

11

13

Source: FICCI KPMG 2012, Ventura Research

and lower carriage fees charged to broadcasters

As explained above due to channel carrying capacity constraints, broadcasters are required to pay carriage fees to the MSOs in order to place their channel on the MSOs network. Also placement fees are paid by the broadcasters to have their channel carried in a higher sequence to ensure better visibility. Carriage and placement fees presently contribute ~50% of the total revenues for the MSOs. Post digitization as the channel carrying capacity of the MSOs will increase, there will not be any demand supply mismatch and hence the broadcasters and MSOs are expecting a decline in carriage fee. Also, since channels of the same genre will be placed together in the digitized network, placement fees are also expected to reduce providing the broadcasters a level playing field.
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August, 2012

However, there is no consensus of opinion with regards to the movement of carriage fee in the near term. We believe that even a significant decline in carriage fees will not impact the MSOs as the gain from the subscription revenues will be far more than the decline.

ARPUs to expand post complete rollout of digitization

Over the past few years APRUs have remained largely suppressed due to high competition among the MSOs and the unorganized nature of the industry. Even during the phased implementation of digitization, we do not expect a major surge in ARPUs as MSOs and DTH operators are on an expansion spree for capturing the same target audience resulting in competitive pricing. However, post completion of digitization, we expect ARPUs to improve aided by value added services and introduction of niche content and increased HD offerings. We expect ARPUs for the industry to stabilize to around `220-225 by FY15 from the current `170-180. Evolution of ARPU as digitization evolves
ARPU (INR Per Month) Digital Analog DTH IPTV 2011 160 160 160 160 2012 170 165 170 170 2013E 180 170 180 180 2014E 201 170 201 201 2015E 226 171 226 226 2016E 253 171 253 253

Source: FICCI KPMG 2012, Ventura Research

DEN well positioned to benefit from digitization

DEN is expected to be one of the biggest beneficiaries of this Digitization. Although the full impact of the revenue benefit would be felt FY15 onward, nevertheless in the interim, the impact on revenue and profitability is expected to be substantial. Post digitization, DENs entire ~11 mn subscriber base (as against the reported number of ~1.4 mn) is expected to start contributing to the revenues. We expect DENs subscription revenues to grow multifold to `853.8 crore by FY14 from `262.34 crore in FY12.

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Growth in Subscription Revenues

1400 1200 90% 80% 70%

Operating margins Cable Business

30.0% 25.0% 19.8% 23.7% 26.9% 28.0%

1000
Rs in crore
800

60% 50%

20.0%
15.0%

600
400

40% 30%
20%

18.5%

10.0%
5.0% 0.0%

200
0

10% 0%

FY11

FY12

FY13E

FY14E

FY15E

Subscription Revenue

% of total revenue (RHS)

FY11

FY12

FY13E

FY14E

FY15E

Source: Den Networks, Ventura Research Estimates

Source: Den Networks, Ventura Research Estimates

Adequate inventory of STBs to result in timely roll out for Phase I

DEN with ~2 mn subscribers enjoys a sizeable market share of 16% in the Phase I cities (Mumbai 12%). Having already seeded 0.8 mn STBs as of June12 in the Phase I cities and with adequate inventory and STB orders placed for 2.5 mn nos, we do not foresee any roadblocks in DEN meeting the deadline for Phase I which ends on October 31, 2012.
STB seeding status as on 1st June12

Estimated Subscribers Total STBs Seeded Percentage Achievement (%)

Source: Ventura Research, MIB

Hathway 2,270,000 909,917 40.1

DEN 2,000,000 429,738 21.5

Digicable 2,000,000 497,650 24.9

WWIL 2,500,000 433,119 17.3

The Phase II rollout is also progressing well and once Phase I is completed concentrated effort on implementation in Phase II is expected to lead to accelerated seeding. From the current ~1.4 mn nos, paying subscribers are expected to go to 3.9 mn by the end of FY14.

Delays in roll out not ruled out

However the pan India rollout is not expected to be without hiccups. Given that the Lok Sabha elections are to be held in 2014 there could be tweaking of the deadline for Phase III and IV leading to extending the roll out time. As a matter of caution we have factored in a three month delay in implementation of Phase II deadline and a years delay each in Phase III and Phase IV deadlines respectively.

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No of STBs to be seeded by Den

3.5 2.9 2.3 2.3

3 2.5
in Millions

2
1.5 1 0.5 0 FY13E FY14E FY15E FY16E

1.1

Source: Den Netowrks, Ventura Research

DTH Players Not a Threat

Despite having a presence in ~42 mn Households since inception (2003), we do not

expect DTH to completely replace the existing analog distribution system. MSOs being deeply penetrated in the Phase I and Phase II regions will restrict the churn to DTH operators and with accelerated rollout of digitization, we expect the MSOs to further consolidate their position. MSOs clearly outperform DTH on various other parameters as enumerated below.
DTH vis--vis Cable
Parameters License Fees Major Investment Channels Broadband services Access to the end consumer Revenue Sharing Ad Spend Service quality
Source: Industry, Ventura Research

DTH 10% of DTH revenues Annual lease payments for transponders to trasnmit channels Limited channel carrying capacity of ~300 channels No broadband services

Cable No license fees One time investment for a head end High channel carrying capacity of ~500 channels Broadband services can be provided along with cable

Only direct subscribers i.e. primary More of secondary subscribers access No revenue sharing with LCO Huge ad spends Rains can disrupt signals Revenue sharing with LCO No huge ad spends since MSO's are well established Consistent signals

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In our opinion, DTH players will experience higher seeding in Phase III and Phase IV regions. However for them to make inroads into Phase I and II will be a tall task given the fact that we have not witnessed significant churn amongst cable subscribers to DTH services. And with completion of phase I already on anvil the going will only get tougher for them.

Carriage fees to rationalize, but multifold jump in subscribers to neutralize impact on revenues
The limited carrying capacity (90 to 100 channels) of the set top boxes provided a windfall to the MSOs with broadcasters paying carriage and placement fees to ensure that they featured in the bouquet of offerings to subscribers. However with regulation requiring that MSOs offer minimum 500 channels, the premium on placement fee are expected to moderate and the carriage and placement income is expected to come down. Discussions with various stake holders clearly points to the fact that the carriage and placement fee could collapse by as much as 50%. While the management of DEN believes that the revenues from this source would only correct post complete rollout we have chosen to be conservative in our forecast. Carriage fees which have so far contributed 47% to the consolidated revenues are expected to decline to 23% going ahead. We have factored a drop in carriage fees to `294 crore in FY14 from ` 327.9 crore in FY12. Given the expected multifold increase in subscription revenues, the drop in carriage revenues will have a minimal impact on total revenues.
Carriage Revenues to fall
350 300 60%

50%
40% 30%

250
Rs in crore
200

150
100

20%
10% 0%

50
0

FY11

FY12

FY13E

FY14E

FY15E

Carriage Revenue

% of total revenue (RHS)

Source: Den Networks, Ventura Research

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Digitization to spur consolidation in the industry

Digitization has turned out to be a key driver for consolidation in most developed markets. Citing the example of United States which was highly unorganized in the pre digitization scenario, the market is now dominated by top 5 players. We believe such a consolidation drive can take place in India as well leading to the emergence of a few organized and well capitalized players over the next few years.
Trends in International Markets
Country US Japan Taiwan Korea Pre-consolidation 50 large players 686 players 600+ players 1000 players Post Consolidation Top 2 MSO's -Comcast (22% Market share) and Time Warner (21.9 % Market share) Top 3 Players- J:COM (30% Market Share) Top Player-TBC (47% Market Share) Top 2 Players- CJ Hellovision (21% market share) and T-Broad (20% market share)

Source: Industry, Ventura Research

Operating margins International Players

45.0 40.0

35.0
EBITDA %

30.0

25.0
20.0

15.0
10.0

CY07
Comcast

CY08
Time Warner

CY09

CY10

CY11
Direct TV

Dish Network

Source: Bloomberg, Ventura Research

Consolidation will also enable MSOs to have a better bargaining power with broadcasters resulting in improved margins and thus better returns to the investors. DEN being one of the major players which has grown the inorganic way is best placed to benefit from consolidation.

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 Distribution JV Media Pro to facilitate better negotiation power

In its initiative to grow through partnership, Den Network and STAR India Ltd formed STAR DEN, a strategic 50-50 Joint Venture (JV) for the distribution of TV channels and services in India. To further reinforce STAR DENs visibility and ensure a better negotiation power aided by a strong bouquet of channels, the company formed a JV with Zee Turner Ltd in May 2011 called Media Pro Enterprise India Private Limited. DEN is a participant in this JV through its 50 percent stake in STAR DEN.
Distribution Business Revenues
700

600 500
Rs in crore

400
300 200 100 0 FY11 FY12 FY13E FY14E FY15E

Source: Den Networks, Ventura Research Estimates

Media Pro enjoys better bargaining power aided by its strong bouquet of 64 channels along with 8 HD offerings, making it the biggest channel distributing agency in India. We expect gross revenues to post a CAGR of 10.3% over FY12-15 to `635 crore. However, we do not expect this business to contribute significantly to the bottom line being a low margin business.

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Financial performance
Revenues for the cable business were higher by 20.7% yoy to `190.1 crore led by increased subscription and carriage revenues whereas operating profits rose by 76.8% yoy to Rs. 46.2 crore. Earnings from the cable business before ESOP expenses almost doubled to Rs. 12.2 crore from Rs. 6.7 crore in Q1FY12. Consolidated revenues are not comparable with past periods due to the change in accounting policy at Media Pro which has started reporting revenues on a net basis (Gross Revenues Cost of Distribution Rights). Consolidated revenues were reported at Rs. 194.9 crore whereas operating profits stood at Rs. 38.5 crore as compared to Rs. 17.9 crore in Q1FY12. Earnings rose multifold from Rs. 1.8 crore in Q1FY12 to Rs. 12.2 crore in Q1FY13.

Quarterly Financial Performance

Particulars Net Sales Growth % Total Expenditure EBIDTA EBDITA Margin % Depreciation EBIT (EX OI) Other Income EBIT Margin % Interest Exceptional items PBT Margin % Provision for Tax PAT Minority Interest & Others PAT (after MI) PAT Margin (%) Q1FY13 194.9 -31.1 156.4 38.5 19.8 15.6 22.9 5.7 28.6 14.7 10.0 0 18.6 9.5 4.5 14.1 2 12.1 6.2 265 17.9 6.3 12.3 5.6 3.8 9.4 3.3 5.1 0 4.3 1.5 1.5 2.8 1 1.8 0.6 Q1FY12 282.9 FY12 1139.3 9.3 1043 96.3 8.5 53.8 42.5 14.8 57.3 5.0 27 0 30.3 2.7 10.8 19.5 5.4 14.1 1.2 931.1 110.8 10.6 45.6 65.2 16.2 81.4 7.8 19.2 -0.5 61.7 5.9 17.4 44.3 6.8 37.5 3.6 FY11 1041.9

Source: Den Networks, Ventura Research

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Financial outlook
DEN is expected to be one of the biggest beneficiaries of the digitization leading to a quantum jump in its revenues and profitability. Despite factoring a delay of three months in the Phase II deadline and a years delay each in the Phase III and Phase IV deadline respectively, we expect the paying subscriber base to reach 3.9 mn by FY14 from the current 1.4 mn. On the back of the increased paying subscribers revenues are expected to almost double to `1,280.9 crore by FY14 from `714.3 core in FY12, while earnings are expected to leapfrog to `93.4 crore from `14.6 crore in FY12 despite higher depreciation from newly seeded STBs and interest cost. However the full benefit of digitization will be felt only FY15 onwards.
Revenue and EBITDA% trend
1800 1600 1400 30.0% 25.0%

PAT Trend
200

180 160
140
Rs in crore

Rs in crore

1200
1000

20.0%
15.0% 10.0%

120 100

800
600 400 200 0 FY11 FY12
Revenue

80 60
40 20 0 FY11 FY12 FY13E FY14E FY15E

5.0%
0.0% FY13E FY14E FY15E

EBITDA % (RHS)

Source: Den Networks, Ventura Research

Source: Den Networks, Ventura Research

Valuation
At a CMP of `124, the stock is trading at 21.5x and 17.6x estimated earnings for FY13 and FY14 respectively. We initiate coverage on DEN Networks Limited as a BUY with a price objective of `210 representing an upside potential of ~70% over the next 18 months. We have valued Den Networks on a single stage DCF, given the sustainable cash flows of the business post the complete digitization of the cable industry.

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Discounted Cash Flow Model

Particulars (Rs crore) PAT Depreciation Interest (1-t) Capex Inc in Non Cash Working Capital Free Cash Flow Years Discount Factor PV of Free Cash Flow Cumulative Cash Flow FY13E 93.8 92.7 31.0 -436.0 16.1 -202.4 1 0.88 -179.0 -179.0 FY14E 113.4 108.2 36.9 -194.0 -36.9 27.6 2 0.78 21.6 -157.5 FY15E 208.6 137.2 42.7 -362.0 -43.2 -16.7 3 0.69 -11.5 -169.0 FY16E 204.9 166.1 46.6 -362.0 -34.2 21.4 4 0.61 13.1 -155.9 FY17E 216.1 169.3 36.9 -40.0 -11.6 370.8 5 0.54 200.6 44.7 FY18E 272.4 172.5 22.2 -40.0 -26.2 401.0 6 0.48 191.8 236.5 FY19E 320.9 175.7 12.5 -40.0 -24.5 444.6 7 0.42 188.1 424.7 FY20E 363.2 178.9 0.0 -40.0 -19.2 483.0 8 0.37 180.7 605.4 FY21E 385.9 182.1 0.0 -40.0 -14.9 513.1 9 0.33 169.8 775.2 FY22E 405.0 185.3 0.0 -40.0 -12.8 537.6 10 0.29 157.3 932.5

DCF Valuation (Rs crore) Terminal Year (n) WACC (%) Terminal Value Discounted Terminal Value Present Value of firm till Terminal Year Total Discounted Value of Firm Less Current net debt of the firm Present Value of Equity No of equity shares (crore) Fair value of Equity Shares

FY22 4% 6,160 1,803 932 2,735 -52 2,787 13.3 209.6

WACC Risk Free Rate Market Risk Premium Beta Cost of Equity Cost of Debt Post Tax Cost of Debt Debt (Rs crore) Enterprise Value (Rs crore) WACC

8.1% 8.0% 0.8 14.5% 9.8% 13.0% 258 2,735 13.1%

Sensitivity Analysis

TP (Rs) 12.1 12.6 13.1 13.6 14.1

2% 209.6 195 183 170 160

Perpetuity Growth Rate 3% 4% 225.3 245 209 225 195 210 181 194 169 180

5% 270 247 228 209 193

6% 303 274 251 229 210

WACC

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P/E
600 500
400

300
200

100 0 Mar-10 CMP 30X

Mar-11

Mar-12

Mar-13

45X

60X

75X

90X

Source: Den Networks, Ventura Research

P/B
300 250
200

150
100

50 0 Mar-10 CMP 1.25X

Mar-11

Mar-12

Mar-13

1.75X

2.25X

2.75X

3.5X

Source: Den Networks, Ventura Research

EV/EBITDA
7,000 6,000
5,000

4,000
3,000

2,000
1,000

0 Mar-10
EV 4X

Mar-11 9X 14X

Mar-12 19X

Mar-13 23X

Source: Den Networks , Ventura Research

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Financials and Projections

Y/E March, Fig in Rs. Cr Profit & Loss Statement Net Sales % Chg. Total Expenditure % Chg. EBITDA EBITDA Margin % Other Income Exceptional items PBDIT Depreciation Interest PBT Tax Provisions PAT Miniority Interest & Others Reported PAT PAT Margin (%) Manpower cost / Sales (%) Tax Rate (%) 136.1 22.4 0.0 9.4 126.7 45.6 19.2 61.9 17.4 44.5 7.0 37.5 6.2 9.9 28.1 470.5 606.6 714.3 17.8 580.3 23.3 134.0 18.8 0.0 6.8 127.3 53.8 27.0 46.5 10.8 35.7 21.1 14.6 2.0 10.3 23.2 936.4 31.1 677.4 16.7 259.1 27.7 0.0 0.0 259.1 92.7 41.4 125.0 31.3 93.8 17.1 76.7 8.2 11.3 25.0 1280.9 36.8 972.3 43.5 308.6 24.1 0.0 0.0 308.6 108.2 49.2 151.2 37.8 113.4 20.0 93.4 7.3 11.3 25.0 FY 2011 FY 2012 FY 2013e FY 2014e Y/E March, Fig in Rs. Cr Per Share Data (Rs) EPS Cash EPS DPS Book Value
Capital, Liquidity, Returns Ratio

FY 2011

FY 2012 FY 2013e FY 2014e

2.8 6.3 0.0 58.4 0.2 1.9 4.8 13.1 0.0 43.9 2.1 2.6 11.7 0.0 104.4 133.9

1.1 5.2 0.0 60.7 0.3 2.1 1.8 11.3 0.0 112.9 2.0 2.2 11.9 0.0 89.6 127.1

5.8 12.8 0.0 66.4 0.4 1.7 8.7 20.3 0.0 21.5 1.9 1.7 6.2 0.0 90.0 125.0

7.0 15.2 0.0 73.5 0.4 1.7 9.6 21.3 0.0 17.6 1.7 1.2 5.2 0.0 90.0 125.0

Debt / Equity (x) Current Ratio (x) ROE (%) ROCE (%) Dividend Yield (%) Valuation Ratio (x) P/E P/BV EV/Sales EV/EBIDTA Efficiency Ratio (x) Inventory (days) Debtors (days) Creditors (days)

Balance Sheet Share Capital Reserves & Surplus Minority Interest & Others Total Loans Deferred Tax Iiability Total Liabilities Goodwill Gross Block Less: Acc. Depreciation Net Block Capital Work in Progress Investments Net Current Assets Deferred Tax Assets Total Assets 133.2 641.4 36.5 158.0 0.0 969.1 0.0 607.3 94.2 513.1 41.3 19.0 382.6 13.1 969.1 149.2 655.7 62.5 258.2 0.0 1125.7 0.0 722.4 146.7 575.7 78.6 25.5 426.6 19.3 1125.7 149.2 732.4 76.6 318.2 0.0 1276.4 0.0 1158.4 239.4 919.0 78.6 25.5 234.0 19.3 1276.4 149.2 825.8 93.6 378.2 0.0 1446.9 0.0 1352.4 347.6 1004.8 78.6 25.5 318.6 19.3 1446.9

Cash Flow statement Profit After Tax Depreciation Working Capital Changes Others Operating Cash Flow Capital Expenditure Change in Investment Cash Flow from Investing Proceeds from equity issue Inc/ Dec in Debt Dividend and DDT Cash Flow from Financing Net Change in Cash Opening Cash Balance Closing Cash Balance 37.5 45.6 -5.8 4.8 82.2 -86.3 51.7 -34.6 0.0 -17.0 0.0 -17.0 30.5 243.2 273.8 19.6 53.8 -1.3 25.6 97.6 -115.1 -43.8 -158.9 -2.5 100.2 0.0 97.7 36.4 273.8 310.2 90.8 92.7 16.1 0.0 199.5 -436.0 0.0 -436.0 0.0 60.0 0.0 60.0 -176.5 310.2 133.7 110.4 108.2 -36.9 0.0 181.7 -194.0 0.0 -194.0 0.0 60.0 0.0 60.0 47.7 133.7 181.5

Ventura Securities Limited Corporate Office: C-112/116, Bldg No. 1, Kailash Industrial Complex, Park Site, Vikhroli (W), Mumbai 400079 This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither Ventura Securities Limited nor any of the contributors accepts any liability arising out of the above information/articles. Reproduction in whole or in part without written permission is prohibited. This report is for private circulation.

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Monday 13 This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.

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August, 2012

Appendix
Working of the Analog mode of cable distribution

Source: Industry, Ventura Research

Working of the DTH mode of cable distribution

Source: Industry, Ventura Research

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Monday 13 This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.

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August, 2012