MUMBAI (NewsRise) -- Zee Entertainment Enterprises, India's largest listed media company, reported a better-than-expected 50% jump in third-quarter profit, aided by a surge in subscription and advertising revenue.
Consolidated net income for the quarter ended in December was 5.62 billion rupees ($79 million), Zee, backed by billionaire Subhash Chandra, said in a statement on Tuesday. Analysts were expecting a profit of 4.22 billion rupees in the quarter, according to a Bloomberg poll.
Armed with more than 76 domestic and international channels and low-cost content creation skills, Zee is at the cusp of an industry-wide transition to new digital content consumption platforms, away from the traditional television medium. Zee's video-on-demand website ZEE5 had more than 56 million monthly active users at the end of December, a 36% jump from September.
Essel Group, the founder and largest shareholder of Zee Entertainment, is exploring the sale of about a 21% stake in the company so that it can make a global push and transform the business into a tech-media company. In November, the company said it hired advisers for the proposed sale which it expects to complete by March or April.
On Tuesday, Zee didn't comment on the progress of the stake sale. Last month, Bank of America-Merrill Lynch downgraded the Zee stock, citing fears that the company is looking for purely financial investors to address the group's liquidity issues in the infrastructure business.
Analysts are also concerned that ZEE5 will have to spend disproportionately on high-quality content and distribution costs to drive viewership and compete against larger players like Netflix and Hotstar.
According to an Economic Times report, Hotstar, backed by Twenty First Century Fox's Star India, is planning to invest 1.20 billion rupees to generate original content to fend off competition.
Zee already has tie-ups with mobile phone operators such as Bharti Airtel and Reliance Jio Infocomm. The company said it is in active discussions with other telecom operators to make its content available to more people.
"While Zee's performance for the quarter was strong on underlying growth in advertising and subscription, the major focus ahead from investors' standpoint is commentary on video-on-demand spending and promoters' stake sale," ICICI Direct said in a report.
The company's operating revenue jumped 18% to 21.67 billion rupees in the third quarter. Subscription revenue soared more than 23%, while advertising, which accounts for nearly two-thirds of the total sales, gained about 22%, according to the statement.
Shares of Zee gained 1.9% in Mumbai trading ahead of the earnings announcement, while the benchmark S&P BSE Sensex closed 1.3% higher.
--Dhanya Ann Thoppil