Morgan Stanley values STAR TV at $11.2 billion

Global media mogul Rupert Murdoch has some good news from India. Global brokerage firm Morgan Stanley has valued 21st Century Fox's subsidiary, STAR TV, at $11.2 billion, higher than all its listed rivals in the country. By comparison, India's most valued listed media and entertainment company, Zee Entertainment, was valued at $5.6 billion on the Indian stock markets as of Friday. The Zee group's cable TV arm, Dish TV, is valued at $1.6 billion, based on its closing price on Friday. The Mukesh Ambani-owned TV18 Broadcast was valued at $824 million.

In a report, Morgan Stanley estimated the fair market value of STAR TV on the basis of rising ad revenue from India and said the firm contributed 11.3 per cent to the overall fair market value of its American parent. This comes amid slowing ad revenue for the media giant from developed markets.

The Morgan Stanley report follows senior officials of 21st Century Fox making a presentation to analysts in August. They forecast STAR TV's earnings before interest tax, depreciation and amortisation (Ebitda) would exceed $1 billion by the end of the decade.

"I think we're still very much on track to see $0.5 billion or so of Ebitda in India within the next three years or so, and a real velocity towards $1 billion of Ebitda shortly thereafter, around the end of the decade or the beginning of the next," said James Murdoch, CEO of 21st Century Fox.

As of June this year, STAR TV's earnings from the entertainment business alone stood at about $300 million (about Rs 1,920 crore). Zee's profits for the year ended March this year stood at Rs 831 crore; its revenue was Rs 3,426 crore.

On the company's India business, Murdoch said with investments in sports businesses and the $375-million all-cash acquisition of regional channel MAA TV, the company was on its way to high profitability and boosting its Asia business. "Remember, earlier, it (STAR) was big and a heavy loss-maker. I think through the past 15 years, we were able to kind of organically invest in programming, organically invest in some new channels in certain areas, and got to a pretty good place. I think at this point, we're really seeing the scale of sports investment, which is really a bigger organic investment than anything we've done there in the past," he said.

"We have good visibility on revenue growth around the business. So, I think when we look at 2017, 2018 or beyond, one can see real operating leverage in terms of profits in the India business come through," he added.

STAR India has acquired media rights for the Board of Control for Cricket in India's domestic and international matches in India through 2018. It has also acquired the digital rights for the Indian Premier League through 2017.