Elara Capital sees 25-30% upside on Sun TV as well as Zee from current levels

Sun TV Network, a prominent player in the Indian media industry, has been making headlines recently with its impressive growth and potential upside. Similarly, the proposed merger between Zee Entertainment Enterprises and Sony Pictures Networks India is also being discussed as one of the significant developments in the country's media industry.

Karan Taurani, Senior VP-Research Media Analyst at Elara Capital, shared valuable insights on Sun TV's performance and the anticipated Zee-Sony merger.

During an interview with CNBC-TV18, Taurani said that Sun TV, excluding its Indian Premier League (IPL) ventures, is poised for a significant upswing, adding that there is still a 25-30 percent upside potential from its current levels.

“There is still a potential of at least 25 percent upside on SUN TV primarily because of rerating of the core broadcasting business,” he said.

Sun TV Network has chosen not to expand its digital network. While many media companies are exploring the digital space, Sun TV's strategic focus remains primarily on its television offerings.

Sun TV Network, headquartered in Chennai, Tamil Nadu, is a significant part of the Sun Group and stands as one of Asia's largest TV networks. Founded by Kalanithi Maran on April 14, 1992, the company has achieved remarkable success. Sun TV Network primarily operates in four South Indian states: Tamil Nadu, Karnataka, Andhra Pradesh, and Kerala. Among its impressive array of channels, Sun TV, the flagship channel, dominates the Tamil General Entertainment Channel (GEC) genre with a market share exceeding 40 percent. This formidable presence underscores Sun TV Network's influence and reach across South India.

Switching gears to the broader media landscape, Taurani also commented on the Zee-Sony merger. He expressed optimism about the merger's progress, stating that it seems likely to proceed, with or without the involvement of Punit Goenka.

Punit Goenka, the former chief of Zee Entertainment Enterprises Ltd, on Friday, moved the Securities Appellate Tribunal (SAT) seeking a stay on the Securities and Exchange Board of India's (SEBI) order barring him from holding key positions within four Zee group firms and in the merged entity of Zee Entertainment Enterprises Ltd (ZEEL) and Sony Pictures Networks India. The SEBI order has alleged that Goenka and his father Subhash Chandra, former chairman of ZEEL, abused their roles as directors and Key Managerial Personnel (KMPs) of a listed company by siphoning off funds for their own benefit. Goenka is likely to question how can he be kept out of office until the probe is completed, which SEBI said could take eight months.

“We don’t foresee Sony waiting for eight months for the merger to happen. We believe that there is a higher likelihood for the merger to go through without Punit Goenka. The merger is well on track with or without him,” Taurani said.

Taurani estimated that the entire merger process will take approximately two months to complete. Furthermore, Taurani believes that the merged entity will be listed this fiscal year, adding another layer of intrigue to the deal.

For investors in Zee Entertainment, Taurani's insights provide reason for optimism. He suggested that there is a likelihood of Zee Entertainment's stock price crossing Rs 340 mark post-merger, which would be a substantial increase from its current levels.

“Once the roadblocks are cleared over the next two months, there is high likelihood of the stock reaching Rs 340-350 levels. So there is a good amount of 25-30 percent potential upside from current levels,” he said.