Zee News Ltd (ZNL) plans to invest Rs 5 billion in a slew of channels over two years, expanding its presence in regional markets and new segments.

Immediately on the agenda is the launch of a Tamil general entertainment and a Telugu news channel. Plans are also afoot to launch an English business and a global news channel.

The company is also bringing to its bouquet mix a clutch of regional movie channels. It will soon apply for a Bengali movie channel while Zee Talkies is being transferred from sister company Zee Entertainment Enterprises Ltd.

In an interview with Sibabrata Das, Zee News Ltd managing director Laxmi Narain Goel chalks out the company's growth roadmap.

Excerpts:

When Zee News Ltd was spun into a separate entity a few years back, it was making a loss due to the Telugu channel. How did things turn around?
The losses from the new businesses have substantially reduced. Zee Telugu, in fact, should break even in the third quarter of this fiscal and Zee Kannada in the subsequent quarter. Our turnover has also gone up from Rs 2 billion to Rs 3.58 billion (standalone) for the fiscal ended 31 March 2008, with Zee Marathi and Zee Bangla seeing exponential growth in the last one year.

Is the company still taking a cautious approach and waiting for some recent channels to break even before launching new ones?
We are launching a Tamil general entertainment channel (GEC) with an investment plan of Rs 900 million in September as the Telugu and Kannada channels are close to earning profits. The Telugu news channel will launch in October while the Malayalam GEC should make its appearance in the next fiscal.

ZNL is also planning to launch an English business and a global news channel. Do you see this the right stage for the company to leap into such high-cost investments?
We plan to invest Rs 5 billion by FY'10 which will include the launch of several channels. Our intention is to have a complete presence in all the segments.

The company is on a high growth curve and expects to clock Rs 3.55 billion in advertising revenues for FY'09, a 25 per cent jump over the prior year. Subscription revenues are expected to grow even faster, soaring to Rs 1.19 billion (from Rs 667.5 million in FY'08). The Telugu and Kannada channels have started generating pay revenues from the last quarter of FY'08 and would only add to this growth.

Will you be inducting a foreign equity partner for the English channels?
We are open to bringing in an equity partner. But all will depend on what proposals we receive from whom and what model is on offer.

ZNL so far has been a mix of news channels and regional language GECs. Will we also see regional movie channels forming the bouquet?
We will soon be applying to the information and broadcasting ministry for clearance to operate a Bengali movie channel. We are also transferring Marathi movie channel Zee Talkies from Zee Entertainment Enterprises Ltd (Zeel) to Zee News Ltd. The broad plan is to bring regional movie channels under the company. This will give us a unique mix and add to the growth of the company.

Zee News has also started a franchising model to enter into new markets. Will you restrict this to smaller markets where it doesn't make commercial sense for you to enter directly?
The first such channel will roll out in Chattisgarh with SB Multimedia as our local partner. We will be leveraging our brand while the local partner will make the investments. We hope to strike such deals with other players in these smaller markets. Once we have a cluster of such channels, we can sell as a package to advertisers and command better rates. Significant revenues can then flow in from the franchising model. It can turn out to be a successful business model.

What made Zee change the positioning of its flagship Hindi news channel?
We have relaunched as a serious news channel and see it as a differentiator in a segment that is witnessing lots of competition. We have decided not to go the tabloid or sensationalism way. This is not the first time that we are changing our positioning. But our motto continues to be the same: We will show what interests the masses and is in the interests of the nation.

When you dramatised the 'Gudiya' story, was this to do more with ratings than anything else?
We saw the story as having a genuine mass interest among our audiences. It was a national interest story.

Isn't it time for the Hindi business news channel to get a makeover?
We will be relaunching Zee Business and making it more market-oriented. But we will not just be a stock market channel; we will address all kinds of markets and segments.

Do you see the surge in personnel and distribution costs upsetting the profitability of the TV news business?
There is a lot of new manpower and talent available in the market today. The supply can only increase. I believe that manpower costs as a share to revenues will not go up, but indeed fall.

As far as distribution expense is concerned, the industry will take 3-4 years to settle down. But with DTH (direct-to-home), HITS (Headend-In-The-Sky) and new platforms emerging, we could see carriage costs peaking once the digital systems take off in a big way.

Zee is continuing to bleed in the Gujarat market. Are there plans to address this by launching a Gujarati news channel to support the GEC?
Zee Gujarati is making a small loss. The local viewers watch a lot of Hindi entertainment content. But we have no plans to launch a Gujarati news channel.

Why is the ZNL scrip lowly priced in the market?
Zee News Ltd is a terribly undervalued stock. It is a profitable company in the news business, has leading regional GECs, and will continue to post strong subscription growth. The market should adequately react to this.