Network 18 beams poor Q3

Network 18 Media is amongst the top losers on the BSE currently. And nothing surprising in that as it ended Q3FY17 with a reverse turnaround. From a consolidated net profit of Rs.50 crore in previous Q3, in current Q3, it posted a loss of Rs.80 crore. Total income also showed a decline of 7% (YoY) at Rs.372 crore while expenses jumped up 7% at Rs.405 crore, exceeding the turnover.

Apart from the 25% rise in finance cost at Rs.25 crore, there was an outgo on Rs.19 crore in the ‘other income’ category. A tax write back of Rs.16 crore helped keep the net loss at the current level. All its two segments – media operations, film production & distribution and both have posted losses at EBIT level. The company has blamed this performance on the impact of new initiatives & one-time expenses but more so, on account of sharp pullback/deferment in spends by advertisers in November-December; this was only partially offset by good growth in the festive season (which fell entirely in October this year) and a mild revival at the fag-end of the quarter.

Its TV home-shopping business has faced a triple-strike of increasing competitive intensity from e-commerce, poor spending appetite during November-December with cash-on-delivery significantly impacted, and regulatory challenges including imposition of entry tax by several states. This business is making substantial losses and is passing through a critical phase.

The only good news here – the company has a very complicated web of intricately woven hoard of companies. To simplify things, it has finally decided to merge 14 of its wholly owned subsidiaries into itself.

The stock price is mired in a shade of deep red, down 3.5% at Rs.35 levels, very close to its 52-week low of Rs.30.50.