Zee Telefilms got a reprieve not only from institutional buying on Tuesday but also as the cycle of selling on the counter has now been completed.

The scrip of the media major proved the biggest gainer among Sensex stocks as a result, and was higher by 4.60% at Rs 77.25 by 11:25 IST. Substantial volumes were recorded on the counter on BSE thus far. In the five sessions between 5 and 12 May 2003, the scrip lost 11.45% to Rs 73.85 from Rs 83.40. Earlier, between 28 April and 5 May 2003, it rose by 31% from Rs 65.55.

Institutions are believed to be buying in Zee today. This coupled with the fact that the cycle of selling by operators on the counter has been completed is lending a firm trend to Zee. As per market talk, CL Securities is believed to be active in Zee on Tuesday.

The rise is also attributed to reports that the government has ruled out any extension in the 14 July 2003 deadline on the implementation of the conditional access system-based broadcasting in the four metros. Players feel the implementation of the CAS regime from 14 July 2003 will benefit ZTL by improving its subscription revenues.

The Ministry of Information and Broadcasting, Government of India, has notified 14 July 2003 as the deadline for implementation of CAS in the four metros of Mumbai, Delhi, Kolkata and Chennai. The free-to-air channel pricing is fixed at around Rs 72 without taxes. Further, it is not mandatory for the consumer to take the FTA, as informed by the management.

However, there have been a lot of uncertainties regarding the actual implementation of CAS. But, Zee's management is of the view that implementation of CAS will help all players in the value chain and it should not be delayed any further.

Nevertheless, Zee is working towards implementing the Digital Headend In The Sky technology for distributing television broadcast signals for CAS through its subsidiary Siticable. It hopes to reinforce its leadership position in the distribution business in India. Notably, the company has plans to invest close to Rs 220 crore (Rs 2.20 billion) in CAS out of which it has already made investments of Rs 150 crore (Rs 1.5 billion) till now.

Zee has tied up with Conax for the conditional access software technology. Trials have been conducted for implementation of addressability in the network. The management believes that the transparency of the CAS regime would create the essential linkage between Siticable's costs and revenues and reverse the trend of pay channel costs increasing beyond revenue collections.

The company expects that set top boxes would mainly be funded by the consumers directly or would be funded by retail consumer financing. Digital STBs priced at approximately Rs 3,500 would be made available to consumers. For the initial push, Siticable would be acquiring and providing STBs to the consumers and catalyse the conversion process to CAS. Later on, Zee would be issuing authorised certificates to traders who would be selling these STBs.

There has been a change in Zee Turner's bouquet during the fourth quarter. While HBO moved out of the distribution platform effective 1 January 2003, CNBC has joined the platform with effect from 1 April 2003. A new fashion channel from the Zee Network, Trendz would be joining the platform on 1 May 2003, while Nickelodeon will move out from 1 May 2003.

Zee was the first to announce that its pay bouquet cost would not increase beyond the present Rs 55 in the CAS environment. The pay bouquet would comprise 15 channels including 11 channels of Zee (including the new channel, Trendz), two channels of Turner (CNN, Cartoon Network), CNBC and Reality TV.

The implementation of CAS will result in a dramatic shift in the way revenues are distributed between various players in the television broadcasting value chain.

Earlier, ZTL announced results which beat expectations. For Q4 ended 31 March 2003, on a consolidated basis, it recorded a massive 75% rise in net profit to Rs 92.54 crore on a 15.8% increase in total sales to Rs 368.47 crore (Rs 3.68 billion). The company recorded an extraordinary expense of Rs 38.61 crore (as against nil in Q4 of last year), after which net profit was merely 2% higher at Rs 53.93 crore.

The results beat projections of a capitalmarket.com poll of analysts - a net profit of Rs 55-75 crore and net sales of Rs 288-326 crore (Rs 2.88-3.26 billion).

For 2002-03, the company's net profit, on a consolidated basis after adjusting for extraordinary expenses, rose by 16.6% to Rs 227.03 crore (Rs 2.27 billion) on a 10.5% increase in total sales to Rs 1,199.32 crore (Rs 11.99 billion).

For Q4 (on a standalone basis), the company recorded a massive 134.65% rise in net profit to Rs 32.57 crore on an 8.6% increase in total revenue to Rs 150.98 crore (Rs 1.5 billion). Net profit rose due to a massive cost-cutting exercise. For the quarter, total expenses declined by 17.2% to Rs 84.82 crore. For the year (on a standalone basis), the company posted a net profit of Rs 87.49 crore on total income of Rs 497.44 crore (Rs 4.97 billion).

But analysts pointed out that the growth in profitability is largely due to the cost-cutting exercise. Future growth of the company continues to be a cause for concern.

ZTL has also said that the business environment (in 2003-04) continues to be challenging in terms of advertising revenues, which are dependent on macro economic factors and the business confidence of major advertisers. However, the company remains confident that subscription revenues will continue to grow. It does not anticipate any lasting impact of the Cricket World Cup on advertising revenues, which has been evident in the few weeks since the culmination of the event.

As on 31 March 2003, promoters held 51.77% stake in ZTL, while the public and institutions held 9.83% and 33.53% respectively.

BSE code: 505537