MUMBAI (NewsRise) -- Zee Entertainment Enterprises, India's largest listed media company, reported a more than 10% rise in third-quarter profit, as cost controls helped offset the impact of a slowdown in advertising spends amid a cash shortage in the south Asian country.
The consolidated net income for the quarter ended Dec.31 was 2.55 billion rupees ($38 million), compared with 2.32 billion rupees a year earlier, the company, backed by billionaire Subhash Chandra, said Tuesday. Total revenue rose 3.4% to 16.39 billion rupees
Brokerage JM Financial had expected a profit of 2.55 billion rupees on revenue of 16.50 billion rupees.
Zee's advertising revenues, which account for more than half the total sales, barely rose 3.4% to 9.55 billion rupees. Ad revenues had grown 17% in the first six months of this fiscal year. Still, subscription revenues expanded 14% to 5.94 billion rupees, while the company reduced its operating expenses by 2.8%.
"Government's decision to demonetize high-value currency had an impact on businesses across sectors," Chandra, chairman of Zee Entertainment, said in a statement. "We believe the adverse impact of demonetization is transient."
India had in November abruptly recalled high-value notes that accounted for 86% of the currency in circulation in a bid to crack down on corruption and unaccounted wealth. The ban has resulted in a sharp deceleration in consumption, leading up to many companies cutting down their advertisement expenses.
Punit Goenka, managing director and chief executive of Zee, said advertisers' willingness to invest in their brands remains intact.
"The timing of spends has been re-calibrated to an extent to suit the change in dynamics due to demonetization," he said. "As economic situation is normalizing, ad spends have already started moving up from December levels."
The challenges at home come even as the Zee Group plans to boost its viewership five times to become one of the top global players by 2020. The broadcaster is targeting Latin America, Europe, Asia Pacific and the Middle East where it is rolling out several new channels that will help the company boost its viewership from its current 959 million.
Over the last one year, Zee has been consolidating its businesses, selling loss-making units, while expanding offerings in key markets.
In November, it agreed to buy some television channels and a stake in the radio broadcasting business of billionaire Anil Ambani to expand in regional markets. In August, it agreed to sell sports broadcasting business to Japan's Sony Pictures Entertainment and its affiliates in a deal that allowed it to exit the loss-making venture.
"Despite improved margin outlook, and sale of loss-making sports business, we expect some reduction in our medium-to-long term operating earnings forecasts, in view of demonetization-linked slowdown in television ad spends and continued weak ratings of flagship Zee TV," J.M. Financial said in a note Wednesday. "Operating costs are likely to move up in coming quarters driven by increase in programing hours, movie releases and purchase of movie rights."
Shares of the company lost 0.44% in Mumbai on Friday, while the benchmark S&P BSE Sensex gained 0.63%.
--Dhanya Ann Thoppil