0 - Confidential - Project Rainbow - Update 29 October 2013.

1 - Confidential -

Project Rainbow - Update

29 October 2013

2 - Confidential -2

• Enterprise value determined in 2012 was INR 1,060 crs ($193M)*

• SPE to acquire 52.28% of Maa TV for a total purchase price of INR 554 crs ($101M)* with:

• SPE will acquire 51% of fully-diluted equity at close for INR 540 crs ($98.3M)*

• Additional 1.28% to be purchased in FYE14 from employee stock option holders for INR 13 crs (~$2.4M)

• Purchase price derived as 22x reported FYE12 Adjusted EBITDA of INR 48.2 crs ($8.8M)*.

• SPE will have a call option on the 47.72% minority position beginning in FYE18

– Call option will be for fair market value, determined by mutual agreement, or by independent valuation if agreement cannot be reached

Valuation Structure Proposed in June 2012

Figures in INR crs FY12A FY13 FY14E FY15E FY16E FY17E

EBITDA (as per Bplan prepared in June 2012) 48.2 59.6 79.4 113.7 161.3 184.4

Actual / revised EBITDA performance 64.6 90.0

Overperformance 8% 13%

Overperformance by Maa TV against performance projected in 2012

* Depreciation in USD-INR exchange rate from INR 55 in June 2012 to INR 61.4 in Oct 2013

3 - Confidential -

Pre DigitisationPre Digitisation Post DigitisationPost Digitisation

Share of subscription

revenues

Consolidation among

distributors

Reduction in carriage

As per TRAI recommendations for pay channels

Very low subscriber revenues accruing to broadcasters & MSOs; Under-reporting at the LCO stage

► Channel carrying capacity for digital cable enhanced to 1,000 – 1,500 standard definition (SD) channels compared to 90 channels in the analog regime

► Increase in capacity to reduce carriage costs for broadcasters – MSOs have witnessed a 15-20% reduction in carriage over the past year

► Consolidation among distributors to gain bargaining power with MSOs

► Zee Turner and Star Den merged their distribution businesses in mid 2011

► IndiaCast and Disney UTV formed distribution JV company in Jan 2013

► Only 3 major players in the distribution space: Media Pro, The One Alliance and IndiaCast

► This will result in higher realisation for broadcasters for their content from MSOs

Changing Landscape: Increase in subscription revenue due to partial digitization…

Source: FICCI-KPMG Report 2013; EY estimates

4 - Confidential -

Broadcasting companies commanding a higher premium in valuation multiples (TTM EBITDA multiples)

Figures in INR crs Revenue EBITDA

FY11 FY12 FY13 FY14E FY11 FY12 FY13 FY14E

Zee Entertainment 3,008 3,041 3,699 4,267 821 740 954 1,155

y-o-ygrowth 1.05% 21.68% 15.33% -10.01% 29.05% 21.02%

Sun TV 2,014 1,847 1,953 2,324 1,578 1,414 1,439 1,641

y-o-ygrowth -8.26% 5.73% 18.99% -10.36% 1.75% 14.00%

Uptick in Financial Performance

Zee: 19.5xSun: 11.2x

Zee: 24.3xSun: 14.9x S

UN

TV

EV

/EB

ITD

A

Digitization reflects in financial performance upstick and higher valuation for comparable companies…

5 - Confidential -

CompanyMarket

cap (INR crs)

EV (INR crs)

FY 2013 FY2014E

EV/Revenue EV/EBITDA EV/Revenue EV/EBITDA

Zee Entertainment Enterprises 25,526 25,375 6.9x 26.6x 5.9x 22.0x

Sun TV Network 16,728 16,312 8.4x 11.3x 7.0x 9.9x

TV 18 Broadcast 3,817 4,031 2.4x NM 2.2x 20.8x

NDTV 538 738 1.4x NM NA NA

Zee Media Corp 298 363 1.2x 9.7x 1.1x 7.3x

TV Today Network - Adjusted* 508 520 1.6x 6.9x 1.5x 6.5x

Median multiples for all broadcasting players 2.0x 10.5x 2.2x 9.9x

Median multiples for GECs (Zee and Sun) 7.6x 19.0x 6.5x 16.0x

Adjusted GEC multiple applicable for Maa TV (10% liquidity discount + 20% control premium + adjusted for time value) 21.7x 18.3x

Market data as of Oct 25, 2013Source: BSE, NSE, Company annual reports

* FY13 EBITDA and PAT for TV Today adjusted to reflect sustainable FY13 Q3 and Q4 numbers

Trading & Transaction Comparables – EBITDA Multiple range: 19x – 22x

Transaction Comparables

Date Target Company Acquirer CompanyRevenue Multiple

EBITDA Multiple

Jan-12 ETV Network channels Network18 Media and Investments 6.2x 22.6x

May-12 Living Media India Limited Aditya Birla Group 7.3x NM

Nov-08 Asianet Communications Star Jupiter Television Entertainment N/A 22.5x

Median 6.8x 22.6x

6 - Confidential -

Purchase Price Scenarios – EV range USD 230M – USD 270M


(in INR crores)Option 1 - Tranche 1 valuation based on FY14; Tranche 2 at FMV -

FY16Option 2 - Tranche 1 valuation based on FY13; Tranche 2 at FMV -

FY16FY14 EBITDA 90 FY13 EBITDA 65EV / FY14 EBITDA (premium) - 100% buyout 18.3x EV / FY13 EBITDA (premium) - 100% buyout 21.7xEnterprise Value 100% 1,647 Enterprise Value 100% 1,402Enterprise Value (USD in mm) 268 Enterprise Value (USD in mm) 228FY14 EBITDA 90 FY13 EBITDA 65EV / FY14 EBITDA (peers) - 52% stake 16.0x EV / FY13 EBITDA (peers) - 52% stake 19.0xEnterprise Value 1,440 Enterprise Value 1,227Net Debt 39 Net Debt 39Equity Valuation 1,401 Equity Valuation 1,188Payout I ( Dec 31, 2013) 52% 732 Payout I ( Dec 31, 2013) 52% 621Payout I ( Dec 31, 2013) (USD in mm) 119 Payout I ( Dec 31, 2013) (USD in mm) 101FY16 EBITDA 161 FY16 EBITDA 161EBITDA multiple at FMV 14.4x EBITDA multiple at FMV 14.4xEnterprise Value / Equity Valuation 2,323 Enterprise Value / Equity Valuation 2,323Payout II in FY16 48% 1,108 Payout II in FY16 48% 1,108PV of Payout II (WACC @ 10%) 916 PV of Payout II (WACC @ 10%) 916PV of Total Payout 1,648 PV of Total Payout 1,537PV of Total Payout (USD in mm) 268 PV of Total Payout (USD in mm) 250

Option 3 - Tranche 1 accounts for overperformance - FY13; Tranche 2 at FMV - FY16

Option 4 - 100% upfront on FY14 EBITDA; payment in two tranches (FY14 & FY16)

Enterprise Value (offered before) 1,060 FY14 EBITDA 90Premium for incremental FY13EBITDA 111 EV / FY14 EBITDA (premium) - 100% buyout 18.3xRevised Enterprise Value 100% 1,172 Enterprise Value 100% 1,647Revised Enterprise Value (USD in mm) 191 Enterprise Value (USD in mm) 268Net Debt 39 FY14 EBITDA 90Equity Valuation 1,133 EV / FY14 EBITDA (peers) - 52% stake 16.0xPayout I ( Dec 31, 2013) 52% 592 Enterprise Value 1,440Payout I ( Dec 31, 2013) (USD in mm) 96 Net Debt 39FY16 EBITDA 161 Equity Valuation 1,401EBITDA multiple at FMV 14.4x Payout I ( Dec 31, 2013) 52% 732Enterprise Value / Equity Valuation 2,323 Payout I ( Dec 31, 2013) (USD in mm) 119Payout II in FY16 48% 1,108 Equity Valuation 1,401PV of Payout II (WACC @ 10%) 916 Payout II in FY16 48% 668PV of Total Payout 1,508 PV of Payout II (WACC @ 10%) 552PV of Total Payout (USD in mm) 246 PV of Total Payout 1,285

PV of Total Payout (USD in mm) 209

7 - Confidential -

Financial Impact to SPE – Accretive / Dilutive Analysis

(a) Goodwill will be tested for impairment on a yearly basis* USD-INR exchange rate - 1USD equates to INR 61.4 (Oct 2013)

EBIT Impact (a)

Option 1 - Tranche 1 valuation based on FY14; Tranche 2 at FMV - FY16 Q4 FY14 2015 2016 2017 TotalEBIT before Purchase Price Amort 19.1 107.3 154.4 177.5 458.3 Less: Purchase Price Amort (29.6) (118.6) (94.5) (73.0) Incremental Annual EBIT to SPE (10.5) (11.3) 59.9 104.5 142.6 Cumulative EBIT to SPE (10.5) (21.8) 38.1 142.6 Incremental Annual EBIT to SPE (USD) (1.7) (1.8) 9.8 17.0 23.2

Option 2 - Tranche 1 valuation based on FY13; Tranche 2 at FMV - FY16 Q4 FY14 2015 2016 2017 TotalEBIT before Purchase Price Amort 19.1 107.3 154.4 177.5 458.3 Less: Purchase Price Amort (25.2) (100.9) (80.4) (62.1) (268.6)Incremental Annual EBIT to SPE (6.1) 6.4 74.0 115.4 189.6 Cumulative EBIT to SPE (6.1) 0.3 74.3 189.6 Incremental Annual EBIT to SPE (USD) (1.0) 1.0 12.0 18.8 30.9

Option 3 - Tranche 1 accounts for overperformance - FY13; Tranche 2 at FMV - FY16 Q4 FY14 2015 2016 2017 TotalEBIT before Purchase Price Amort 19.1 107.3 154.4 177.5 458.3 Less: Purchase Price Amort (21.1) (84.3) (67.2) (51.9) (224.6)Incremental Annual EBIT to SPE (1.9) 22.9 87.2 125.5 233.7 Cumulative EBIT to SPE (1.9) 21.0 108.2 233.7 Incremental Annual EBIT to SPE (USD) (0.3) 3.7 14.2 20.4 38.1

Option 4 - 100% upfront on FY14 EBITDA; payment in two tranches (FY14 & FY16) Q4 FY14 2015 2016 2017 TotalEBIT before Purchase Price Amort 19.1 107.3 154.4 177.5 458.3 Less: Purchase Price Amort (29.6) (118.6) (94.5) (73.0) (315.6)Incremental Annual EBIT to SPE (10.5) (11.3) 59.9 104.5 142.6 Cumulative EBIT to SPE (10.5) (21.8) 38.1 142.6 Incremental Annual EBIT to SPE (USD) (1.7) (1.8) 9.8 17.0 23.2

(in INR crores)

8 - Confidential -

Option 1 Option 2 Option 3 Option 4

Description

Tranche I valuation at current fair value based on FY14 EBITDA and Tranche II valuation at fair value as in FY16

Tranche I valuation at current fair value based on FY13 EBITDA and Tranche II valuation at fair value as in FY16

Tranche I valuation to account for over-performance in FY13 EBITDA and Tranche II valuation at fair value as in FY16

Acquire 100% upfront as per current fair valuation; payment in two tranches (FY14 and FY16) with a floor & cap structure

Enterprise Value @ 100% (INR crores / USD millions)

1,647 / $268 1,402 / $228 1,172 / $191 1,647 / $268

PV of payout – 52% (FY14) & 48% (FY16)

1,648 / $268 1,537 / $250 1,508 / $246 1,285 / $209

Premium over US$ 193mm* last offer – 100% Case

38% 18% -1% 38%

Premium over US$ 193mm* last offer – 52% Case

38% 30% 27% 8%

Accretive Accretive from Yr 2 Accretive from Yr 1 Accretive from Yr 1 Accretive from Yr 2

Sony’s perspective

Results in a high payout (PV)

Covers for potential underperformance in FY16

Results in moderate payout (PV)

Risk of future underperformance

Results in a moderate payout (PV)

Covers for potential underperformance in FY16

Results in a moderate payout (PV)

Partial risk of future underperformance

Maa’s perspective

Valuation in line with transactions in the space

High probability of acceptance

Does not account for Maa’s overperformance in FY14 compared to industry

Medium probability of acceptance

Does not account for Maa’s overperformance in FY14

Upside to promoters from FY16 performance


Captures current trading multiples of listed peers

Promoters will have visibility on payout quantum


Scenario Summary


(in INR crores)

0 - Confidential - Project Rainbow - Update 29 October 2013.

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Transcript of 0 - Confidential - Project Rainbow - Update 29 October 2013.