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Dish TV Equity Research

HomeCompanyDish TV Equity Research

Date of Research – 14 January 2016

Price – Rs.93.50

About the Company

Incorporated in 1988, Dish TV India Limited (“Dish TV” or the “Company”) is India’s first direct to home (DTH) entertainment service. The Company is a division of Zee Network Enterprise (Essel Group Venture). Essel Group Venture has national and global presence with business interests in media programming, broadcasting & distribution, and entertainment. The Company’s product portfolio includes DISHTV Standard STB (Set-Top Box), a digital receiver that connects to a television; and DISH truHD Plus that offers hi-definition television entertainment along with advanced recorder capabilities. Dish TV added 5 new HD channels with effect from April, 2013.

Dish TV has on its platform more than 400 channels & services including 22 audio channels and over 42 HD channels & services with more than 10.7 million net subscribers as of March 31, 2013.The Company has a vast distribution network of over 1,598 distributors & over 157,000 dealers that span across 8,600 towns in the country. Dish TV customers are serviced by four 24* 7 call centres catering to 11 different languages.

Key Financial Figures

Consolidated (Rs. Cr)
Particulars FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Total Income from Operations 2,166.80 2,508.97 2,781.64 3,059.94  3,014.39 
Expenses 1,587.38 1,884.94 2,048.53 2,035.02  2,041.53  
Earnings Before Other Income, Interest, Tax and Depreciation (Operating Profit) 579.42 624.03 733.11 1,024.92  972.86  
Depreciation 627.58 597.36 613.84 590.71  663.08
Finance Costs 128.42 132.75 175.41 208.73  223.89
Other income 51.14 64.89 63.50 64.04  47.51  
Exceptional items (59.44) 116.37 –  – 
PBT (66.00) (157.56) 7.36 289.52  133.40  
Tax 0.01 0.05 4.22 (402.90)  24.12
Extraordinary items –  – 
PAT (before Minority Interest and share of Associates) (66.01) (157.61) 3.14 692.42  109.28  
Profit/ (loss) attributable to Minority Interest (0.01) –  – 
Share of profit / (loss) of Associates –  – 
Consolidated Profit / (Loss) for the year (66.00) (157.61) 3.14 692.42  109.28

Profitability Analysis

Consolidated (%)
Particulars FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Operating Profit Margin Ratio 26.74 24.87 26.36 33.49  32.27 
Net Profit Margin Ratio (3.05) (6.28) 0.11 22.63  3.63 

Operating profit margin is a measurement of the proportion of a company’s revenue that is left over after paying for production costs such as raw materials, salaries and administrative costs. Net profit margin is arrived at by deducting non operating expenses such as depreciation, finance costs and taxes out of operating profit and shows what is left for the shareholders as a percentage of net sales. Together these ratios help in understanding the cost and profit structure of the firm and analysing business inefficiencies. 

Key Balance Sheet Figures

Sources of Funds / Liabilities (Rs. Cr)
Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
Share Capital 106.36 106.48 106.50 106.56 106.59
Reserves & Surplus (200.22) (262.06) (419.10) (419.94) 274.12
Net worth (shareholders funds) (93.86) (155.58) (312.60) (313.38) 380.71
Long term borrowings 1,019.35 846.02 779.11 1,153.54
Current liabilities 1,518.13 2,301.16 2,197.66 3,454.82 2,324.32
Other long term liabilities and provisions 190.36 163.16 106.01 24.82 80.81
Deferred Tax Liabilities
Total Liabilities 2,633.98 3,154.76 2,770.18 3,166.26 3,939.38

 

Application of Funds / Assets (Rs. Cr)
Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
Fixed Assets 1,808.76 2,087.53 1,779.68 1,951.04 2,420.06
Noncurrent Investments 150 150 200 150.00
Current Asset 648.76 992.91 745.06 914.66 761.34
Long term advances and other noncurrent assets 26.46 74.32 95.44 100.56 171.98
Deferred tax assets 436.00
Total Asset 2,633.98 3,154.76 2,770.18 3,166.26 3,939.38

Efficiency Analysis

  (%)
Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
ROCE 53.59 83.92 133.77 66.80
ROE (141.82) 181.88

Return on Capital Employed (ROCE) measures a company’s profitability from its overall operations by calculating the return generated on the total capital invested in the business (i.e. equity + debt). Return on Equity (ROE) or Return on Net Worth (RONW) measures the amount of profit which the company generates on money invested by the equity shareholders. In short, ROE draws attention to the return generated by the shareholders on their investment in the business. Together these ratios can be used in comparing the profitability of the company with other companies in the same industry. 

Valuation Analysis

Consolidated
Particulars FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Total Income from Operations (Rs. Cr.) 2,166.80 2,508.97 2,781.64 3,059.94  3,014.39 
Growth (%) 10.67% 15.79% 10.87% 10.00 %  (1.49 %) 
PAT (Rs. Cr.) (66.01) (157.61) 3.14 692.42  109.28  
Growth (%) 101.99% 21951.59 %  (84.22 %) 
Earning Per Share – Basic (Rs. ) (0.62) (1.48) 0.03 6.50  1.03 
Earning Per Share – Diluted (Rs. ) (0.62) (1.48) 0.03 6.50  1.03 
Price to Earnings 3230 13.35  77.23 

Dividend History

The Company has not declared any dividend over the last 5 financial years.

Liquidity and Credit Analysis

Current Ratio

Higher current ratio implies healthier short term liquidity comfort level. A current ratio below 1 indicates that the company may not be able to meet its obligations in the short run. However, it is not always a matter of worry if this ratio temporarily falls below 1 as many times companies squeeze out short term cash sources to achieve a capital intensive plan with a longer term outlook.

Dish TV’s average current ratio over the last 5 financial years has been 0.52 times which indicates that the Company has not been maintaining sufficient cash to meet its short term obligations.

Long term Debt to Equity Ratio

Companies operating with high long term debt to equity on their balance sheets are vulnerable to economic cycles. In times of slowdown in economy, companies with high levels of debt find it increasingly difficult to service the interest on their borrowings as profit margins decline. We believe that long term debt to equity ratio higher than 0.6 – 0.8 could affect the business of a company and its results of operations.

Dish TV’s average long term debt to equity ratio over the last 5 financial years has been 2.99 times which indicates that the Company operates with high level of debt and is not placed well to withstand economic slowdowns.

Interest Coverage ratio

Interest coverage ratio indicates the comfort with which the company may be able to service the interest expense (i.e. finance charges) on its outstanding debt. Higher interest coverage ratio indicates that the company can easily meet the interest expense pertaining to its debt obligations. In our view, interest coverage ratio of below 1.5 should raise doubts about the company’s ability to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the company is just not generating enough to service its debt obligations. 

Dish TV’s average interest coverage ratio over the last 5 financial years has been (0.25) times which indicates that the Company cannot meet its debt obligations.

Ownership pattern

In its latest stock exchange filing dated 31 March 2016, Dish TV reported a promoter holding of 64.44 %. Large promoter holding indicates conviction and sincerity of the promoters. We believe that a greater than 35 % promoter holding offers safety to the retail investors.

At the same time, institutional holding in the Company stood at 23.77 % (FII+DII). Large institutional holding indicates the confidence of seasoned investors. At the same time, it can also lead to high volatility in the stock price as institutions buy and sell larger stakes than retail participants.  

About the Author

Rajat Sharma pictureRajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.

 

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