As investors watch the corporate fight for control of India’s largest publicly traded television network unfold, hopes for industry consolidation and economic reopening are turning the country’s lagging media stocks into winners.
The 10-stock Nifty Media index has jumped 46% since the end of August, driven by an 81% rise in heavyweight Zee Entertainment Enterprises Ltd – which received a non-binding offer from Sony Group’s Indian unit the month last and said is open to other proposals. Zee’s rally put the media gauge on track to beat the benchmark NSE Nifty 50 in annual gains for the first time since 2017.
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If a deal for the Hindi-dominated broadcaster is struck, India’s media sector, hit hard by the pandemic and competition from streaming giants like Netflix and Amazon.com, could be poised for more gains.
“Consolidation is inevitable. At some point media companies will have to think about merging with each other because most of them are making losses,” said Kranthi Bathini, strategist at Mumbai-based WealthMills Securities, adding that low margins in the media space add to the incentives for businesses. merge with cash buyers.
Reopening of cinemas
A potential deal with Zee, however, isn’t the only catalyst. Recent gains in the media gauge were also fueled by cinema operators PVR and Inox Leisure – up around 23% and 35% month on month – as the easing of Covid-19 restrictions allows the reopening of cinemas.
Additionally, broadcasters like Zee, Network 18 Media & Investments Ltd. and Sun TV Network Ltd. should benefit from the start of India’s three-month long festive season, which is boosting expectations for business spending on sales and advertising. Shares of Network 18 Media have soared nearly 37% over the past five sessions.