Zee Entertainment Enterprises Limited (ZEEL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the ZEEL conference call update on corporate development. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Joshi. Thank you, and over to you, sir.

Thank you, Pooja. Hello, everyone, and welcome to today's call to discuss update on proposed transaction with Sony. Hope you all are well and taking good care of yourselves. We have with us today our MD and CEO, Mr. Punit Goenka; CFO, Rohit Gupta; Head of M&A, Vikas Somani; and Head of Strategic Initiatives, Mukund Galgali. We will start with a brief statement from Mr. Goenka and subsequently open the floor for Q&A. Today's discussion would be limited to the announcement of the proposed transaction, and any questions related to the performance of Q3 results should be reserved for earnings call post Q3 results are announced. Before we begin the call, I would like to remind everyone that anything we say during the call that refers to our outlook for the future is a forward-looking statement and must be taken in the conjunction of the risk that we face. We will begin now. Thank you, and over to Punit.

Thank you, Amit. Good evening, everyone. Hope you all are doing well and staying safe. I would like to thank you for making time for this interaction today. We have achieved yet another significant milestone in its enterprising journey of nearly 3 decades, offering the best of entertainment across multiple consumer touchpoints. I'm immensely pleased that Zee and Sony have signed the definitive merger agreement to combine our entertainment portfolios that span across linear networks, digital assets, production operations and program libraries. This moment has been a culmination of several weeks of hard work during our exclusive negotiation period wherein the 2 companies conducted mutual due diligence. Both the companies have very strong presence in the Indian market, across entertainment genres and platforms. And this combination has all the ability to create a leading media and entertainment company in India. The combined company is expected to accelerate growth by offering rich content backed by data and technology-led solutions to deliver robust consumer experience across screens. Additionally, the infusion of growth capital in the combined company will help drive scale by pursuing growth opportunities across the business. It will also enhance our content creation capabilities, fortify our footprints in the digital ecosystem and enable us to bid for media rights in a fast-growing sports landscape. I really look forward to leading the company -- the combined company as the Managing Director and Chief Executive Officer and unlocking its immense potential. As of today, these are the key details that I can share with you all. While this is a good positive step, as you are all aware, there are multiple stages in bringing the combined company into existence. As for the process, we will now move forward with the next steps that involve the necessary regulatory and shareholder approvals in accordance with the law. As we progress further and design the future course of the combined company strategy, we will keep you apprised. There are certainly exciting times ahead of us as we explore the potential of this combined company and accelerate its growth in the country. On that note, we can now commence the Q&A session. Thank you very much.

Thank you, PG. We'll now proceed to the question-and-answer session. I would request the moderator to take the discussion forward. Thank you.

[Operator Instructions] The first question is from the line of Abneesh Roy from Edelweiss.

Congrats, Punit, on today's development. My first question is on the OTT. Post-merger, the combined OTT app, if that will happen, that will become the second largest OTT app. So my question is in terms of sports, et cetera, how serious will the combined app will be? And in the interim, how will you play it? Because ZEE5 and ZEE is also bidding for -- for example, for the Dubai T20, et cetera. So in the interim, what will be the plan on sports? And on the sports as a merged entity, how aggressive will you be? And one more related question is, when I see the pricing of the competition, Amazon Prime has increased its annual ARPU charge from consumers. On the other hand, Netflix, which is very expensive has cut. So do you see that the pricing in terms of aggression by the competition is now reversing towards the upside? So ARPU is now likely to increase in the next 2 to 3 years, I'm not saying in the very near term. So the best -- the lowest pricing is now behind from a OTT ARPU perspective?

Thank you, Abneesh. So on the OTT side, let me first say that as of now, the 2 companies continue to run the business on as-is basis. We cannot come together for any coordination until and unless the merger process is completed. And therefore, we will be considering bidding for sports rights, whether it be IPL or any other as we have taken a conscious decision to enter back into the sports business. Having said that, we will be aggressive in sports acquisition independently and also jointly as and when the company comes together but keeping prudence in mind that eventually we have to deliver shareholder value. So that is -- remains intact as a DNA of the ongoing concern. In terms of the OTTs merging, that is a decision that the MergeCo Board will have to make, and I'm unable to comment on that at this point in time.

Sure. My second question is on the bidding war which happens in terms of the movie rights, both on the OTT and the TV rights. We have seen, last 4, 5 years, there has been a fair amount of aggression in the industry. Now because of this consolidation, do you see the movie bidding rights that aggression in the industry reducing because there is one lesser player? So what will be your thoughts on that? And also a related question, on the cost synergy, could you give some more detailing. You have always spoken on the revenue synergy of 6% to 8% or 6% to 10%, whatever is the number, but on the cost, not getting into the employee cost, but on the other cost, is there any sizable saving or we should look at more in terms of the revenue synergy just throwing into the EBITDA?

So first and foremost, the bidding wars on the film side, Abneesh, I don't think just because of this one consolidation it will soften up. But certainly, we will try and bring some rationality there as much as we can in our control. But keeping in mind that the ultimate objective of the business is prime, and that has to be met. In terms of your other question on cost synergies, I actually meant that we have a total synergies of 6% to 8%. A large part of this will come from revenue and some part will come from cost. So we can't -- our focus is more towards revenue synergy and costs will find this thing over a period of time.

The next question is from the line of Naval from Emkay Global.

Congratulations Punit for this transaction. Two questions. One, with this delisting and listing of the new entity, will it have any implication on minority shareholders? I mean tax implication on minority shareholders under current SEBI rules? And second question is on brand merger, in terms of -- will you be keeping 2 separate brands? And if yes, for how long brand merger, when it will happen? Sir, any time lines for that as well?

So first question, I'll let Vikas handle on the delisting part.

Yes. So as [indiscernible] of the shares, the listing of the shares will get suspended for some time. And what we gather from our advisers is that that process should take around 3 weeks to get completed and post 3 weeks the listing will again resume.

And about taxation part, will it be negative on tax implication to the minority shareholders because of this transaction altogether?

No. So from -- you mean for the share -- the tax of the shareholders, that's what you mean?

Yes.

No. So that -- we have taken a holistic view on this particular move. And keeping everything into consideration, what we are looking at here is that what is the best possible structure between both the partners going forward so that a long-term value can be created. So that is what the objective which we have kept in mind while coming up with this structure right now.

Okay. And Punit, if you can take second question.

So, Naval, with the merger, the brand ZEE also gets merged into the new entity and will belong to the NewCo -- or the MergeCo. And as of now, that's what I can tell you. Now it is for the new MergeCo's Board to decide which brands to keep and for how long. But from my own intuition purposes, both the brands are strong brands and with loyalty attached to themselves. So we will take a -- the Board will take a prudent call at the right time.

And one last question. Can you suggest the time line in totality, how much it will take for all the approvals to be in place and merger to get effective?

I expect that it should be 8 to 10 months at the outset. Vikas, do you have a time line?

Yes. The time line of the merger is what as PG has said. This is going to take around 8 months for the entire process to get completed. Sorry, just -- sorry, I'm sorry. On your earlier question, I again want to clarify, this is not a delisting.

Okay. So then the tax implication will not come into play. Understood.

It's -- yes, tax merger is tax neutral for all the shareholders.

The next question is from the line of Vivekanand S. from AMBIT Capital.

Congrats on the merger. With the merged entity now having around INR 15,000 crores cash on book, how are you thinking about utilization of the cash over the next few years? I'm asking this in the context that ZEE used to return cash to shareholders. I mean you had redeemable preference shares. So INR [15,000] crores return over 5 years. And you were also paying a dividend another INR 300-odd crores per year. So now what is the thinking with respect to cash? Are you going to hold on to it, suspend dividend? How should we think about allocation of the cash? I mean will it be primarily for acquisition of content? Or will you also end up acquiring other firms given that you have so much cash reserve?

So, Vivekanand, you are absolutely right. The cash that is coming into the company will be utilized for multiple reasons, which could mean further M&A opportunities in the digital space. It could mean bidding for premium content like sports. It could also accelerate our investment in the digital business. So that's what we are going to be utilizing this cash for. And again, the capital allocation will be decided by the new MergeCo Board as and when they get formed. On the dividend side, we intend to remain a dividend paying company going forward as well. The intention is not to stop paying dividend.

Okay. Just one small follow-up. So the cash infusion of $1.5 billion by Sony. Now was it decided based on the capital requirement perceived by the 2 companies in the business or was it because Sony wanted to have 50.9% stake? So I'm just trying to understand the motivation behind the $1.5 billion infusion number.

It was a combination of [indiscernible] these factors. Yes, definitely Sony wanted to have a control over the company as far as shareholding is required. That was a basic required or ask from Sony. And the second factor was also, we also had -- had sat together and made an estimate of what kind of cash would be required in order to achieve what we need to achieve. So this growth capital has been infused and it meets both the objectives, both for the company and for the Sony as well.

The next question is from the line of Ankur Periwal from Axis Capital.

Congratulations. First question, continuing with the $1.5 billion cash, if I take into consideration fees infusion as well as the existing cash on the books, the incremental sum is around $1.2 billion itself. So let's say that an aggregate of $1.5 billion, but we have aspirations to scale up in sports. You also mentioned IPL in your comments. Do you think this fund will be sufficed to sort of address all those content investments or probably as a merged entity we are okay to probably lever it up and then take the investments ahead?

Sorry, I didn't understand your first part about how it is $1.2 billion, how did you arrive at that number?

So taking INR 1,000-odd crores that we have -- that we will be as promoters putting into the company and the existing cash balance on Sony, ballpark numbers?

Okay. Okay. Okay. So -- yes, I think you're absolutely right. This is the kind of capital required for the plans that we have foreseen as of date over the next 3 to 5 years.

And will probably be okay to sort of lever the balance sheet and maybe increase the investments further if need be so, especially on the sports side?

As you now, no. That is for the new MergeCo Board to decide whether they would like to leverage the company or not. But as of now, there is no such plans.

Sure. And second question on the synergies side. So our understanding was probably that 6% to 10% synergy was more on the revenue side. But you corrected that this is probably on the overall side, led by revenues. Correct my understanding there because my sense is that ad yield differential itself should contribute to that delta there. And apart from that, there could be many sort of maybe loss-making investments which either Sony or we are doing, or which are not commensurate to the market share gains versus the synergies, whether it is on sports on the regional network side. So shouldn't the synergy be much higher over there?

Yes. So, Ankur, there could be other upsides that you are mentioning, but we have taken a conservative view currently. Obviously, all those details can be evaluated going forward once the merger takes place. Secondly, just want to clarify, revenue synergies come in much faster and cost synergies take time to be realized. So what I gave you the number, 6% to 8%, is within the first 12 -- first financial year -- full financial year operations, where we will get the revenue synergies in place, whereas cost synergies may take some more time to flow through.

The next question is from the line of Sanjesh Jain from ICICI.

If I look at your synergy of 6% to 8%, Punit, and you mentioned that majority of it will come from the revenue side, that also indicates that we see very little scope for further channel consolidation. Will that be a right assumption to make?

Yes. Actually, there is no -- too many overlapping channels that we have in the portfolio. So I think that's the right statement that you are making.

That's the right statement. And will we maintain this genre kind of a division within the Sony and within the ZEE where we were catering more to a family and the other one was more a comedy genre. That thought process continues that -- the dominance will continue and the program portfolio, which we have, will continue, or we are looking at even synergizing the program portfolio and the program capability between the 2 companies.

Every portfolio channel has a unique proposition that it offers the viewer. So changing that would be actually detrimental to the entire business, and therefore, that will remain core to it. But anywhere we can bring in synergies and efficiencies from -- either from our learnings or from their learnings, we'll certainly look at those and bring those in for best practices.

And then, of course, there are going to be the scale benefits also.

What will be the scale benefits?

With both the -- I mean what we are talking about here is that with more revenues coming at the same cost structure and that is what we are targeting to achieve.

We have spoken of a very little cost synergy, right. That contradict your statement.

No, so we are talking about the -- I'm talking about the revenue upside out here when I say the scale benefit. We are -- again, I'm repeating, so we are saying, we will try to maintain the same cost structure. And we are, as PG has just said that we haven't considered a lot of cost synergies right out here. But what we will try to achieve with the same cost structure is how to scale up the revenue.

Got it. Got it. One from the regulatory side of it, do we see any roadblock or a possible query from the CCI considering that the industry will see a meaningful consolidation with this merger?

We don't expect anything of that sort. It's going to be a form to file in and it's going to be a joint filing between us and Sony. And I'm sure they will raise their questions, but we are well prepared to answer any of those. Also keep in mind that there is a precedence of merger of this scale and size that has just taken place in the recent past, and therefore, we don't see any issues.

So that should not be a cause of concern for anybody?

No, it's not.

So, Punit, just for the benefit of us, you did mention that it will take 8 to 10 months, but if a brief -- what are the permissions which will be required for this merger to go through? If you can just list that that will be very helpful.

Yes. Vikas?

So the approvals which we require out here is, number one, is, of course, CCI and we'll also have to do thefilings with the stock exchanges. We'll have to get stock exchange's approval, following which there would be NCLT process and definitely the shareholder approval.

Got it. We will require MIB approval as well, ministry approval?

Yes, we'll have to apply to MIB also.

MIB also. Just wanted to understand this part of going delisting and again listing in 3 weeks, at what phase will that come in?

That will come in post this year NCLT, all approvals have come in. That's actually the last phase.

Okay. That's actually after the NCLT and before the ROC registration. Is that the right understanding?

It's a very standard process. And as I said, that is actually the last phase in the entire scheme of things.

Yes, but you are right.

Post all approvals, yes.

No, no, just wanted to understand at what stage it comes so we are prepared for that as well. Best of luck, Punit, for the future venture.

Thank you, Sanjesh.

The next question is from the line of Jaykumar Doshi from Kotak.

Congratulations on closing this in 90 days. I've got 2 bookkeeping questions. First one is, in a nonbinding offer, Sony was going to merge into ZEE. But in the final offer, ZEE is now merging into Sony. And that did leads to delisting and relisting in 3 weeks of sort of period in between. So just want to know what was the rationale of this change in structure, how…

No, there is no change in structure even at the time sheet -- nonbinding term sheet…

I understand that merger ratio and all is fine, but instead of ZEE -- Sony merging into ZEE, ZEE is now merging into Sony. So how does it make a difference from?

No, that's what I'm clarifying, Jay. Even at the time of the nonbinding term sheet, Sony was not merging into ZEE, it was always ZEE merging into Sony, and that is something that Sony wanted and that was the structure we had come up with, with them.

Okay. Understood. Second is, I'm not sure I was looking at the tables in the scheme of the arrangement. And will Essel Group continue to be promoters in the merged entity, combined entity?

Yes, we will continue to be promoters.

Right. So then as per the current regulation that means that in case if there is any ESOP plan in future, as a promoter one cannot participate in that arrangement. Is that correct?

That is correct.

Okay. So those were the 2 bookkeeping questions. One on broadly, you mentioned you will aggressively look at acquisitions of sports rights. So are you -- I'm assuming you're looking at both digital and television rights for upcoming IPL and other properties. Is that correct?

Yes. But I used the word aggression with caution.

No. I understand. But let's assume if digital is not available, would you be still willing to commit a large amount to television right of sports or it will be either combination or nothing?

Highly unlikely, Jay.

Understood. And what is -- just for my understanding, what is the amount of capital that is necessary or required. Let's assume, if you're bidding for IPL and if you win both the rights, is $1.5 billion more than adequate in terms of advances that you may have to pay? What is the nature of advances? We hear about the actual contract number that runs into a few billion dollars over a 5-year period. But what is typically the advance that is necessary for -- in some of the sports rights?

So the last bid document talked about 50% -- sorry, 1 year's rights fee as bank guarantee and 50% advance for 1 year's tournament. But what would be this year's bid documents and the terms we have no idea as the documents are not out yet. And what we have done is, our calculation is more than adequately suffice for those kind of requirements plus our investments in the digital business that we may look to accelerate.

Perfect. Just final one, since you've done due diligence of Sony, I had 1 or 2 questions. What in your view is the investment that Sony is making in Sony Liv today? And what would be the losses that they would be incurring at this point?

Sorry, Jay, I'm forbidden from sharing those details as of now.

The next question is from the line of Himanshu Shah from Dolat Capital.

Congratulations for the deal. Sir, first question, Sony was supposed to infuse, as per the Draft scheme of arrangement, around $1.6 billion. In the revised -- in the final arrangement, it is infusing close to $1.1 billion. And the merged entity was supposed to have nearabout $1.9 billion to $2 billion, including cash on fees. But now the press release is mentioning $1.5 billion of cash. So can you just explain this gap of close to $400 million, $500 million, the lower infusion from Sony side?

Yes. As per the term sheet, Sony was supposed to infuse $1.575 billion into the company. Now it is going to infuse $1.5 billion into the company, which is $75 million less. And this has been post due diligence as per the relative valuation which has come up. These are the numbers == I mean $1.5 billion is the resultant number.

So Sony will infuse $1.5 billion or the merged entity will help $1.5 billion?

Sony will infuse $1.5 billion into the company. It is [indiscernible] $1.5 billion into SPNI before the merger happens and thereby the merged entity will also sit with this [indiscernible] with that cash.

Okay. Okay. And secondly, Punit, I believe you have mentioned on the media interview that shareholder approval of -- 75% of the shareholders will need to approve the deal. Now in case this 75% threshold is not reached to, then what is the fallback option?

There is no fallback option in that case, Himanshu. The merger does not go through, and we continue life as it is.

Fair enough. And lastly, since this process will now take at least around 8 to 10 months and -- will there be some more disclosures on the merged entity part on a quarterly basis till the time merger is done or it's unlikely?

No, there are not going to be any more disclosures right now.

The next question is from the line of from Amit Dalal from Tata Investment Corporation.

This is a question for the CFO. It's more an accounting question. Post-merger, given the fact that there will be a creation of goodwill, what -- from the present capital employed of ZEE, the merged entity will have a capital employed of what kind of a number will simulate at that. It would be based on the market cap of the company today, right?

Yes. So -- on this we'll have to get back to you. This is a very technical question on the goodwill accounting. So we need to get back to you on this one.

The next question is from the line of Deepak Gupta from Reliance Nippon Life Insurance.

My first question is, if you could share some perspective on how the valuation of INR 53,000 crores was arrived for the merged entity?

Vikas?

Can you repeat the question, please?

The question was, how the value of INR 53,000 crores for the merged entity was arrived at? If you could share some perspective on the same.

See, the valuation has been done on a relative basis, the relative basis of both the businesses and the business plans. That's how the valuation has been arrived. It's a relative valuation of both the businesses.

Okay. And this includes the cash infusion of $1.5 billion which Sony was doing in the merged entity?

Yes. That's right.

Understand. And the second question is, I believe for Sony India the music business and the movie production business is outside the merged entity. So is that understanding correct? And if it's correct, what will happen for the music and movie production business of the merged entity once the merger takes through?

That is correct. Sony's music business and the movie production and distribution business is outside the merger. But our production business and music business will continue in the merged entity.

But Punit, wouldn't that then create competition between Sony and the merged entity given the fact that you all will be been doing -- you all will be vying for the same rights for the movies as well as for the music?

Yes. That's what it will do. So that's something the way it is. [indiscernible] businesses are not structured under SPNI as of now also.

So do you think in future that can get consolidated or maybe the merged entity stop the music and the movie production business?

We will see after the merger. Right now, I think we have our hands full to get this thing done and then probably engage with them afterwards. But that's -- it's a big if.

The next question is from the line of Manish Ostwal from Nirmal Bang.

I have one question on the -- why the Sony management team is not on the call to talk about the -- because at the end of the day it is backed by Sony and remains on the board of Sony, so…

Because, one, they are not listed. Second, that will be in contradiction to the CCI guidelines.

Okay. The second question to the CFO. Sir, can you clarify the part of the equity dilution because the number is not clear when I put the calculation. The INR 173 crore of fully diluted equity after the merger.

Sorry, can you repeat the question again?

So as per the scheme of arrangement, there is a subdivision, then there is bonus, then there is capital infusion in the SPNI and then there is swap ratio of 133 and 85. If I take [indiscernible] all those things the capital -- outstanding Sony capital is 140 crores shares whereas the number is 173 crores. So there's some mismatch. So can you explain the part of dilution?

Yes. I mean in terms of the exact math or the exact number of shares, that I will -- we will follow-up on this and will come back to you. But let me just clarify in terms of the shareholding, the percentage shareholding. So before excluding the noncompete, if you exclude the noncompete, Sony Group will be holding 52.97% into the company and ZEEL from public shareholders will be holding 45.15% and ZEEL promoters will be holding 1.8%. Post the noncompete transaction, Sony Group will be holding 50.86%, ZEEL public shareholders will hold to same amount, of course, 45.15% and the ZEEL promoters will be at 3.9% -- 3.99%.

We'll come back to you, Manish, with the exact calculation of the share capital.

The next question is from the line of Jinesh Joshi from Prabhudas Lilladher Pvt Ltd.

Sir, what happens if any of the contingent liability of ZEEL materializes post merger? I mean will the new entity subsume it or is there any other provision?

Vikas, contingent liability of ZEEL.

No, the contingent liabilities will get transferred and as a going concern it will remain and be treated -- will be given the same treatment as it's given right now.

So you mean the new entity will subsume it, correct?

Yes, that's right. That's right.

Okay. And secondly, on the amortization policy, I mean we have certain policy with respect to movie rights and music rights, and my belief is that Sony may have a different structure. So post this merger going through how will this policy be realigned?

That policy will be realigned when the merger goes through by the new MergeCo Board and then made public.

Okay. Sir, one last question. Now since we are into a definitive agreement, just in case if the process is stalled because of any regulatory reason or say for example lack of shareholder approval, will it lead to any kind of liability on the part of ZEE?

Well, not on the account of shareholder approval, et cetera, it does not lead to any liability. But in the event that we breach any of this thing, then there could be [indiscernible].

Sorry, in case we…

There is an exclusivity obligation on each other and there is a penalty associated with that.

The next question is from the line of Abneesh Roy from Edelweiss.

Yes, essentially -- two follow-up questions. So one is on the international business, we've seen ZEE's international revenues being stagnant or some dip in the past few years. Now Sony, obviously, the global player and obviously is very big in music and movies, so do you get some advantage because of that in terms of international because as a bouquet also to the Indian expat and maybe to some of the foreign consumer, you will become a bit more relevant. So could you talk about that benefit? I'm sure it comes in the 6% to 10% but wanted to understand how significant it is.

Certainly, it will benefit, Abneesh, by bundling our content in the international markets. As I said, even in the Indian markets we do have lot of benefits of bundling together because of practically no overlap of the kind of audiences we address and more so that will be relevant in international markets because of their kind of content which may resonate much better there.

Sure. Second question is on sports. So 5, 6 years back, you had exited sports and now you have started bidding because you said it makes much more sense now. But wanted to understand, in the next 2 to 3 years perspective, based on your cost conscious strategy, which will continue even in the merged entity, but your aggression which will go up in sports, how do you see the sports losses? Because I am sure it's making a lot of sense from OTT perspective. But from a loss perspective, if you could give us some color because Ten Sports never made money.

Yes, you're right. And it is going to be a challenging one. But certainly, as I said, aggression is with caution. And that does not mean that we'll start pouring oodles of cash into losses. But if it means short-term losses for the gain of the OTT business, we will make those prudent call at the right time. But right now, Abneesh, I will not be able to share more color on that.

No, not any numbers, but I wanted to understand when you say it makes more sense, is it just from a subscriber market share perspective, it makes sense because in OTT, currently, this is land grab phase. So it makes a lot of sense to acquire customer rather than looking at profitability or is it a good mix of reasonable, not very high losses and obviously, market share gain because of the subscriber, which one is it that I wanted to get a sense on?

So I think it's a combination of the 2. The most obvious one is the acquisition of subscriber base because that gives you a sure-shot acquisition of a large subscriber base. And then you use other content to retain the same subscriber. So it's in the short-term acquisition, but in the mid-to-long term it has to make some amount of financial sense. May not be as much profit as the other entertainment portfolio of the company but certainly cannot be losing money forever.

Sure. And last question, recently regulator asked for suggestions how to make the industry more friendly, how to improve the ease of business. Do you see for your kind of business, broadcasting and say, OTT, is there some good tangible significant benefit if the recommendations, et cetera, get approved? These are very initial days, but is it more applicable to broadcasters or more to the distribution side?

Abneesh, it's an open call. Let me not talk about regulators. We can talk off-line.

The next question is from the line of Vivekanand S. from AMBIT Capital.

Historically, we as a group or rather the Essel Group has invested in infrastructure as well like distribution, either via cable or DTH. And in the past, we have also considered investing in SugarBox to increase our distribution and reach. Would the cash also get utilized for, say, last mile consumer reach or, let's say, increase of distribution? That's one. Secondly, what about -- historically, we had a view of, say, the market where we had 6 genres, right, now new genres are also emerging like winning content and then there are distribution platforms that are getting from exclusively for winning. Is that something we would consider at all because we have also -- given that Sony has strength in this space globally, is this an area that you will be considering to invest?

Yes. So Vivekanand, to your first question, the answer is no. We are not going to be investing in infrastructure for last mile connectivity. To your second question, we'll certainly evaluate all opportunities going forward and exactly gaming is something that's big, and we know it is big. It's growing very fast. And Sony does have a lot of strength in that area. We'll certainly consider and try and make it part of our portfolio.

User-generated content, you had tried something with [indiscernible] right, ZEE5. So is that something that you are looking at very seriously?

Yes, we are looking at that very seriously.

The next question is from the line of Naval from Emkay Global.

Yes. So I have a question on accounting policies. In terms of -- as the due diligence done with, so is there a significant difference in content amortization?

Yes, there is a difference in content amortization -- on amortization and especially in relation to the amortization of the movie content, and that is something, of course, which both companies need to harmonize going forward.

Can you suggest what is the difference?

We cannot quantify right now for you.

And any other difference as well on the normal nonmovie content amortization?

Not much. As I said, the significant difference is on the movie content amortization.

The next question is from the line of Rohith Potti from Marshmallow Capital.

Congrats on getting this done within 90 days. I was hoping you could give me more clarity on the cash component that Sony is bringing in because I'm still a little confused. So from the disclosure, it seems that for around 26 crores shares, Sony is going to infuse INR 7,950 crore, which is $1.1 billion. So could you bridge the gap between this $1.1 billion and $1.5 billion that you've been talking about?

Yes, sure. And see, the Sony will need to ensure that just before closing they need to bring in $1.5 billion of cash into the company as part of this transaction. Now how this cash is going to come is as follows. From a -- Sony is going to get the noncompete compensation to the promoters and the promoters, in turn, are going to infuse cash of around 300 -- sorry, of around $147 million to $148 million into the company. The balance of the cash needs to come from Sony itself. And that will come in the form of the cash infusion right just before closing, plus also whatever cash they would have already infused into the company between now and till then. So let's say, between now and till then, if they would have already infused around $300 million, then the balance is what they need to bring in just before closing. So the sum total of all these 3 different cash infusion streams is $1.5 billion.

So what you mean to say is that $1.1 billion of -- with 26 crore share infusion is happening right now that has been disclosed. The $147 million to $150 million that has been given as noncompete to the Essel Group is -- that's also included and there will be additional share infusion, for which around $300 million will be infused by Sony. Am I correct?

Yes, the 26 crore shares which you are talking about, that part of the cash infusion will happen as a part of the scheme. And over and above, there will be cash which they already would have infused into the company between now and then. And then the third part is the cash which will come by the infusion of -- will come through infusion by the ZEE promoters.

Okay. So there will be -- I mean, in addition to whatever disclosed in the scheme there will be additional shares -- cash infusion by Sony between now and when the deal is consummated, that's what you're saying.

Absolutely correct.

Okay. And addition to this, whatever cash is with ZEE in the books right now and with Sony in the books, together there will be -- it will reach around $2 billion. Am I right?

It won't reach to $2 billion. But yes, whatever cash is there in ZEE's books today, that's over and above this $1.5 billion. Yes. And thanks for asking this because I believe there has been some confusion in regards to this. So again, I want to repeat myself that Sony all put together is going to infuse $1.5 billion as on the date of closing or just before closing.

The next question is from the of Kshitij Saraf from Tusk Investment.

It's more around what to expect in the next 6 to 8 months until the merger is complete. Would the strategies continue to be the way they are for ZEE and Sony at an individual level or would there be convergence starting already?

No, until and unless the merger does not take place, we cannot converge and bring strategies together. So it will only start to happen post merger. Until then, the 2 companies will operate as individual entities as they are operating right now.

Okay. Got it. And in terms of ZEE5, we see in different interviews that there are plans to integrate education, sports, elements -- with elements of AR, VR and some other elements into the ZEE5 app. So where are the plans going as far as the -- as far as enhancing the ZEE5 app experience to make it into a full-blown digital sort of an app and not a media app? So where are we with that?

Kshitij, work is on on that and maybe we can take it up in the quarter 3 earnings call. Today, we can just restrict to this transaction, please.

The next question is from the line of Mridul Shah from Amara Capital Private Limited.

Sir, my question was regarding the noncompete fee of INR 1,100 crores. What is the tax implication, if any, on this? And how does this tie down to the 2.1% that you're talking about?

Yes. As far as the -- I mean in regards to the noncompete transfer of -- or the noncompete compensation to the promoters, there is no tax implication to the company on this.

No, not with the company, but I believe that INR 1,100 crores will go to a promoter entity as an individual company whatever, and that money will…

Sorry. Sorry, please complete.

Sorry, no, I was just saying sir that money goes there and eventually comes back to the company. So are we saying the exact INR 1,100 say net of the tax comes to the company or are we saying INR 1,100 minus the tax comes to the company and that implies 2.1%?

That INR 1,100 crore cash payment is between promoters -- between Sony promoters and ZEE promoters. It's not a part of any transaction to do with company. And again, I'm repeating, Sony will ensure that at the end of the day $1.5 billion of cash in totality comes into the company.

I completely agree that the transaction is between Sony and ZEE. So we are saying INR 1,100 crores comes from ZEE irrespective of the amount transferred between Sony and ZEE.

That's right. That's right. That's correct.

The next question is from the line of Arun Malhotra from CapGrow Capital.

Just wanted to check since I understand the shareholder approval is going to be the most critical part. Did we have discussions in the past in the last 90 days about any objections they may have or any feedback they may have?

No, Arun, we have not engaged with any shareholders. We will only engage with the shareholders after filing our applications with the CCI and the stock exchanges.

Ladies and gentlemen, this was the last question for the day. I would now like to hand the conference over to Mr. Amit Joshi for closing comments.

Thank you, everyone, for your interest. Should we have any further queries, feel free to reach out to us. Thank you again, and please do take good care of yourself.

Thank you. On behalf of ZEE Entertainment Enterprises Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.