NDTV: Buy

An investment can be considered in the stock of leading news broadcaster NDTV with a three-year perspective. The stock trades at a valuation discount to rivals such as Global Broadcast News, which operates the competing English news channel CNN-IBN. There is also potential for unlocking of value in the company’s subsidiaries, which are set to launch a network of channels over the next year or two.

Admittedly, NDTV has disappointed on the earnings front in recent quarters, as the company invested heavily in talent, with one-time bonuses and salary increments, significantly increasing personnel costs. There have also been signs of pressure on advertising revenues as rival channels CNN-IBN and Times NOW dent its market share. To maintain its market share, NDTV has had to step up marketing and promotional spends.

However, performance is likely to improve as NDTV launches new channels targeted at the entertainment and lifestyle genres. Over the medium term, these forays could reduce its dependence on flagship channel NDTV 24X7 and on the news segment, where competitive pressures from new channels continue to build up. Advertisers may also seek out niche channels as viewership gets increasingly fragmented.

The company recently launched NDTV Good Times, targeting lifestyle and consumption trends, with programmes on travel, food, fashion, technology and luxury. The format is still relatively unexplored in India and could attract high value advertisers targeting the premium segment. The channel has a co-branding arrangement with Vijay Mallya’s Kingfisher group; the latter has already taken up some of the commercial slots. Good Times’ shows on cooking, fitness and fashion do appear to have appeal and are likely to find favour with the women’s segment, a key target audience for advertisers.

NDTV also has plans to launch city specific channels and has made a start with MetroNation in Delhi. It plans to launch four other channels in the metros of Mumbai, Kolkata, Bangalore and Chennai. The focus on metros may also prove lucrative from an advertising revenues perspective, as these cities are more mature retail markets.

While the company is likely to face competition from entrants such as INX Media and Viacom 18, NDTV has networked with the big names in the entertainment business. As the talent crunch builds, NDTV’s investments in personnel might finally pay off.