Service tax

Direct tax

Excise duty

Defenseexpenditure

Fiscal deficits

Subsidies

Government borrowings

Budget deficits

Indirec

t tax

Corporation tax

Income tax

Import duties

R

R

Expenditure

Good

s and

servi

ce ta

x

PRE BUDGET ANALYSIS REPORT MEDIA

Kotak Securities - Private Client Research Please see the disclaimer on the last page For Private Circulation 26

PRE-BUDGET ANALYSIS February 15, 2013

MEDIA

Current view The media sector has, in the past, made several demands for tax sops on im-

ported equipment needed for digitization (mainly set-top box). The industry holdsthe belief that DAS implementation shall provide a long-term benefit to the gov-ernment (service tax collections), and the industry should be provided temporarybenefits in terms of funding. However, prior inaction of the government, espe-cially in FY13 budget that preceded DAS deadline in several cities (official dead-line for Phase 2 cities is also March 31st), indicates that the government believesthat the sector can manage its own funding. We believe that higher foreign limitsallowed in the cable distribution sector do provide companies access to outsidecapital, and are likely to be deemed to suffice, for now. Therefore, we expectthat demands for lower customs duty/ grant of infrastructure status to the industryshall not be met.

Broadcasters have, for long, been demanding that service tax applicable on ad-vertising in the sector be removed (for parity with print publishers). DTH serviceproviders have similarly been asking for a rationalization of taxes (incidence ofstate-wise entertainment taxes to be reviewed). We believe that these demandsshall not be met in this budget. However, there is a possibility of the multipletaxes on DTH to be subsumed into GST. Insights into these matters are unlikelyto be available at the point of presentation of the budget.

EXPECTED BUDGET IMPACT:Positive

LONG TERM OUTLOOK:Positive

Reduction ofcustoms duty on set-top box, grant ofinfrastructure statusto cable industry

Sops to cableindustry

Unlikely Govt. refused to applymeasures in last budgetdespite DAS deadlines inseveral geographies

Nil

Reduction on DTHservices (multiple taxissues), removal ofservice tax onadvertising inbroadcasting

Service Tax/ Multi-plicity of taxes

Unlikely Long standing demands;no particular reason toexpect action in thisbudget

Nil

Key budget expectations

Issues Industry wish-list Our expectation Rationale for our Impact of ourexpectation expectation

Source: Kotak Securities - Private Client Research, Industry

Top picks

Company Price EPS (Rs) PE (x) Recommendation(Rs) FY13E FY14E FY13E FY14E as per our last

report

DB CORP 239 11.9 14.7 20.1 16.3 ACCUMULATE

ENIL 232 11.8 12.9 19.7 18.0 BUY

SUN TV NETWORK 446 17.2 20.3 25.9 22.0 ACCUMULATE

TV18 BROADCAST 28 - 0.9 NM 31.3 BUY

Source: Kotak Securities - Private Client Research

Kotak Securities - Private Client Research Please see the disclaimer on the last page For Private Circulation 38

PRE-BUDGET ANALYSIS February 15, 2013

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