Zee Entertainment Enterprises Limited (NSE: ZEEL) Q2 2025 Earnings Call dated Oct. 18, 2024
Corporate Participants:
Mahesh Pratap Singh — Head of Investor Relations
Punit Goenka — Managing Director and Chief Executive Officer
Mukund Galgali — Acting Chief Financial Officer
Unidentified Speaker
Analysts:
Abneesh Roy — Analyst
Abhisek Banerjee — Analyst
Umang Mehta — Analyst
Abhishek Kumar — Analyst
Arun Prasath — Analyst
Jinesh Joshi — Analyst
Akshat Bairathi — Analyst
Sameer Deshpande — Analyst
Navid Virani — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Q2 FY ’25 Earnings Conference Call of Zee Entertainment Enterprises Limited. [Operator Instructions]
I will now hand the conference over to Mr. Mahesh Pratap Singh, Head of Investor Relations, Zee Entertainment Enterprises Limited. Please go ahead, sir.
Mahesh Pratap Singh — Head of Investor Relations
Thank you, Ryan. Hello, everyone. Welcome to our Q2 FY ’25 earnings discussion. We hope you’ve had an opportunity to go through the earnings. Today, we are joined by our Managing Director and CEO, Mr. Punit Goenka, along with the senior management team. We’ll start the call with opening remarks from Mr. Goenka, followed by commentary on operating and financial performance by Mr. Mukund Galgali, our acting CFO. We will subsequently open the floor for a question-and-answer session.
Before we get started, let me remind everyone on the call that some of the statements made or discussed on today’s conference call will be forward looking in nature and must be viewed in conjunction with risks and uncertainties we face. The company does not undertake to update any of these forward-looking statements publicly.
With that, I’ll now hand the call over to Mr. Goenka for his opening remarks.
Punit Goenka — Managing Director and Chief Executive Officer
Thank you, Mahesh. Good evening, everyone. I hope all of you are doing well and gearing up for the festivities. Let me take this opportunity to wish you much in advance. May this Diwali bring a lot of happiness and prosperity to each one of you. Hope you all have planned a good break with the family. I appreciate your time and would like to thank you for joining us this evening as we discuss the company’s performance during the second quarter of the financial year 2024-2025.
Being an eternal optimist, to me, optimism is not just an approach, but a conscious choice, a choice that enables me and my team to transform challenges into opportunities. The strategic growth plan that has been implemented stems from this firm belief. Today, I would like to touch upon the steps taken in line with this plan to achieve our targeted aspirations for the future.
We aligned our strategic priorities to enhance our performance and profitability levels across the Board with frugality, optimization and a sharp focus on quality content as the core pillars. I’m pleased to share with all of you that this approach is displaying tangible results for the company and we are witnessing a consistent improvement in performance on a sequential basis. A more prudent cost discipline and sharper focus on operations has enabled us to clock strong improvement in the EBITDA margin coupled with robust free cash generation even on a incessantly challenging macroeconomic environment.
Let’s look at the subscription revenues. The outlook remains healthy as the underlying effect of the NTO 3.0 has stabilized. Amidst this scenario, the company has consistently displayed resilience and demonstrated its ability to grow while judicially balancing pricing and churn. We remain optimistic for a further uptick in the subscription revenues in the second half of the fiscal on the back of healthy trends in our linear and digital segment.
On the advertising revenue front, while the sentiments remained subdued during the quarter, for the industry at large, we have seen some pickup from the month of September with the onset of the festive season. Hence, here as well, we remain optimistic about the upcoming festive quarter, leading to an uptick in the advertising revenues. That said, I must mention there is a strong and sustained rural consumption pickup is surely needed for the industry at large. Our viewership share across markets also witnessed an increase, which serves as a testament to our concerted effort invested by the teams in delivering more compelling and engaging content to our viewers across languages. The gains in market share quarter on quarter enable us to remain well positioned in an increasingly competitive landscape.
Let’s move on to the digital side of the business. The efforts shown into achieving a balanced cost structure for the digital business are enabling us to drive growth back into ZEE5. The performance of ZEE5 is consistently improving quarter on quarter, showcasing immense potential, and we aim to achieve stability in growth from the third quarter onwards. We also continue to offer a compelling content slate to our users at a competitive price point. Post a thorough review and restructuring exercise, we have sharpened the focus of our technology and innovation center in Bengaluru to support the linear and digital teams in a holistic manner on the content creation, distribution and monetization process.
As we continue to enhance our performance sequentially, we remain enthused by the well-diversified portfolio of the company, encompassing four strong business segments. This enables us to reduce dependencies and maintain a firm grip on profitability across the Board. For instance, the music business has proven to be an asset for the company in terms of building scale and margins.
As the second largest music label in the country, Zee Music Company is enhancing its rich catalog with a sharp focus on profitability. As we step into the second half of the fiscal, the overall growth outlook for the company remains positive. We have taken the necessary action-oriented steps to enhance the performance across all aspects and we are confident on further strengthening the margin profile going forward. We are well on track to achieve our targeted margin aspirations, and we remain firmly committed towards our set goals for the future. The translation of our efforts into profitability is visible in our cash flow as well, which has inched up during the quarter and continues to strengthen our financial muscle.
As the industry continually evolves and competition intensifies, our ability to fortify our position as a formidable player in the ecosystem remains strong. I have always maintained that healthy competition augers well for the growth of the industry at large, and it will only generate more opportunities for the players in the ecosystem. The company has a proficient leadership team that will enable us to achieve our set goals and priorities for the future. With this dedicated and agile team at the forefront, we are confident of enhancing the company’s capabilities met by many folds to redefine the new era of entertainment.
We continue to maintain a sharp focus on returning to our industry-leading margin profile as we invest in strengthening our businesses for the future. As we work on these steps, we remain committed to fortifying our portfolio across all segments with a prudent cost discipline approach. Prudent cost discipline is an act [Indecipherable] to hand over the call to the desk where the buck stops.
Over to you, Mukund, for you to elaborate more on our operating and financial performance. Thank you, everybody.
Mukund Galgali — Acting Chief Financial Officer
Thank you, Punit. Thanks for the introduction. And good evening, everyone, and it’s great to connect with you all for the first time at this forum. I will briefly touch upon some of the key financial highlights. Quarter two has been another strong quarter for Zee with focused execution on our key priorities. And before I get into specific quarter two performance, let me sum up our progress against some of the key objectives we had outlined in February 2024.
In quarter four of ’24, our EBITDA margins were at 9.7%. In a short span of two quarters, we have improved our margins by 630 basis points to 16%. Our solid progress on margins improvement despite a weaker macro is a great testimony of dedication and hard work put in by the teams across the business. This margin improvement is a function of targeted bottom-up interventions across every element of cost structure and business segments, which give us a fairly high degree of confidence about sustainability of this performance.
Texture of this margin improvement is also extremely heartening given that we have moved the needle significantly on strategic segments like ZEE5. ZEE5’s quarterly EBITDA losses have narrowed down from INR265 crores in quarter four of FY ’24 to INR159 crores EBITDA loss in quarter two FY ’25.
I will empathetically add here that we are fully conscious about balancing our near-term margin aspirations with longer-term growth objectives and, hence, are also continuing to invest in the business to support future growth ambitions. In fact, in quarter two FY ’25, we have also stepped up our investments in the business, which I will touch upon.
Translating our operating profit to consistent free cash has been another focus area for us. With improving profitability and extremely efficient working capital management and optimized content acquisition, our cash position has also improved meaningfully. Including the INR2 billion FCCB proceeds during this quarter, our liquidity and cash has — our cash position has strengthened to INR17.8 billion as at 30 September 2024, compared to INR8.3 billion as on 31 December, 2023. With access to growth capital from the recent FCCB raise and the consistent internal accruals from our operations, we are well placed to navigate the evolving market landscape and take advantage of emerging growth opportunities. Our content inventory and advances have also continued to trend down and are lower by INR5.1 billion between 31 December, ’23 to 30 September, ’24.
On revenue front — on the revenue growth front rather, while macro ad environment softness has restrained our ability to drive advertising revenue growth, we have been able to drive a healthy Y-o-Y growth in subscription revenues on back of price hike in linear business and growth in subscribers in our digital business. We have also strengthened competitive positioning of our linear business with 60 basis points network viewership share gain in the last two quarters. This positions us extremely well to capitalize on micro ad spend recovery.
Now briefly coming to quarter two performance, while our ad revenue headwinds have persisted as seen in an 8% Y-o-Y ad revenue decline, a 9% Y-o-Y growth in subscription revenue has enabled to more than offset this impact. A lean movie lineup has resulted in a muted other sales and services revenue during the quarter as against a very high base in quarter two of FY ’24 due to Gadar 2, which, as you all know, was a massive hit. Resultantly, overall revenues from operations has been lower by 18% Y-o-Y. We are optimistic about ad revenue pickup in quarter three with the onset of festive season. However, we will closely monitor sustenance of that pickup beyond the festive spike as rural demand commentary is still uneven.
On the subscription side, we remain confident about maintaining the current growth trajectory. We are also looking forward to planned movie releases in H2 of FY ’25 across Hindi and language markets, which should provide some fillip to the other sales and services revenue.
From an industry backdrop perspective, the linear landscape remained healthy with the TV viewership and reach remaining stable. Zee continues to be a strong number two TV entertainment network and has gained 100% — 100 bps of viewership share Q-o-Q, taking our viewership share to 17.4% in quarter two. This Q-o-Q network share gain is quite broad-based and driven by viewership across several language markets.
On the digital side, ZEE5 continues to make steady progress and has delivered healthy KPI for usage in engagement. Both the number of paying subscribers and average watch time has grown during the quarter. ZEE5 revenues are up 6% Q-o-Q. And adjusted for a one-time syndication deal, which happened in the base quarter last year, ZEE5 revenues are also up Y-o-Y. ZEE5 EBITDA loss has further narrowed down during the quarter, and we are hopeful of continuing to trend down as the growth picks up in H2, providing some operating leverage.
Moving to cost and profitability. Our strong cost discipline is evident across all cost line items. Our efforts towards rightsizing our cost structure and improving efficiencies are yielding encouraging results. This is evident from our EBITDA margins improvement by 320 basis points Q-o-Q. Along the way, we are also taking some of the cost efficiencies and investing back into business. As an example, this quarter, Zee TV has launched three new shows while we stepped up content and marketing investments across the broader linear portfolio. We have also reinstated salary increments for our entire workforce effective 1 September.
PAT from continuing operations for quarter two was up to INR210 crores, a robust increase of 61% Y-o-Y. This net profit from continuing operations is at a 10-quarter high, reflecting significant progress in business fundamentals and a streamlined cost base. I’ve already covered the balance sheet trends in terms of cash buildup and inventory reduction. From cash deployment point of view, we are evaluating a few potential areas and would remain fairly opportunistic and flexible in our deployment approach to maximize returns.
Moving to H2 FY ’25, having made good strides on margins, accelerating revenue growth is a key priority for us. We are prepared to further step up investments wherever necessary, keeping that growth objective in mind. We do expect a gradual recovery in ad revenues from quarter three with festive season kicking off. We also expect to sustain growth in subscription revenues in ZEE5. On margins, having executed meticulously on our cost intervention plan in H1, the path of further margin expansion now has a degree of dependence on growth and operating leverage.
Having said that, we are firmly committed to our 18% to 20% EBITDA margin aspirations by the end of FY ’26. And we believe that we will continue to balance the dual objectives of stepping up growth while managing costs very judiciously.
I’ll hand it over back to you, Mahesh. Thank you.
Mahesh Pratap Singh — Head of Investor Relations
Thanks, Mukund. Ryan, we can open the call for questions.
Questions and Answers:
Operator
Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from the line of Abneesh Roy with Nuvama. Please go ahead.
Abneesh Roy
Yeah. Thanks and congrats on good margin improvement. My first question is on the content and there are two, three sub-questions to that. One is now your financial position, margins are improving. So in terms of content sourcing, are you now in a better position versus, say, one year back when things were more challenging for you?
Second is we have seen in the movie production for other players, I am not talking about Zee, I’m talking about say Dharma Productions. One week, it comes Saregama is acquiring. Second week, it comes Reliance is acquiring. We had seen Vashu Bhagnani bankruptcy-related news flow. So my question here is, what are your thoughts on the consolidation of the movie production, especially in Hindi? And where do you see Zee in that? From a two to three years’ perspective, would you like to become a more serious player there given the very high risk, which is there, and that’s why we are seeing the legacy players also looking to kind of sell out. So what are your thoughts on why this is happening? What is the issue? And what will be your plans on movie production from a one to two years’ perspective? That is the first question.
Punit Goenka
Yeah, Abneesh, so I don’t think that it was really a challenge for us to acquire content. Even a year back, we were acquiring a lot of content for both our linear business and for our digital business. But of course, the current financial situation gives us better leverage and better opportunities where we can look at wherever opportunities do come up that we can use that using our cash situation. Having said that, our objective on managing our inventory and advances will always remain also quite prime from that perspective. So we will — it has to be a balance between the two things.
As far as your question on the film business goes, it’s very difficult to compare people like Dharma or the others with Zee because we are at the end of the day, a corporate, and they are actually, for lack of a better this thing, individual run companies. And this could be just their way of cashing out while the things are going well for themselves. Where do I see Zee, I think we will be at the forefront of film production business, not just in Hindi, but across languages in the country. And we will continue to invest in both co-productions and full production of our own in both the segments of Hindi and language markets going forward.
We did slowdown that in the past 1.5 years. But I think the slate is picking up speed again, and there are huge opportunities that may come up. Of course, acquiring any of these players that you talked about, it’s very difficult to assess because at the end of the day, the talent is what is running those businesses. And if we do not have long-term commitments on the talent, what are we actually buying? So from that perspective, we are evaluating those things and seeing what we need to do. But certainly, we will continue to be in this business going forward.
Yes, you were right, when we said that it’s a high-risk business, but that’s the case with any content piece that we run. Even on our linear business or on our ZEE5, not every piece of content that we launch is successful. We do get it wrong at times and that’s the nature of the business that we are in. Mukund talked about Gadar 2 in the FY ’24 same quarter. Now that was a huge lottery for the company. So these things are part of that. But the way to look at it, Abneesh, from our perspective is that this is completely a strategic part of our business because it feeds into our core business of linear television as well as into our digital business of ZEE5, plus the music business. So from that perspective, I think that is something that I would like to say. Yeah.
Abneesh Roy
So my question will be on your last point of music. So we have seen the two listed music companies stocks also do well and business also do well. Zee Music used to be quite a serious player a few years back. So what is your thoughts there? Because music is much lesser risk versus movie production. And now with — at some stage, the consumer turning pay. What will be your thoughts there, lower risk, improving metrics in the next two to three years’ perspective, music?
Punit Goenka
No, absolutely. I think music, as I said in my opening remarks as well, is one of the key pillars of the segments that we run. And we will continue to invest behind that going forward as well. As I said that we may have slowed down because of our entire film production business, et cetera, I truly believe that going forward, music will continue to be a key asset for the company, and we’ll continue to invest behind it.
Abneesh Roy
Last quick question. So we have seen the merger of Reliance and Disney underway, and if you could talk about competitive dynamics next six to 12 months, how do you see that changing given there is a clear consolidation, plus your own market share, there is some improvement and your financial metrics are improving. Plus, Sony, now there is a big question mark on what is their own strategy. Of course, question mark is there for you also given the number one player now will be much, much bigger than you and Sony. So could you talk about market share? What is the aspiration next one to two years? And competitive dynamics you see because of consolidation, what can be the benefits of that? What can be the challenges because of that consolidation next one to two years?
Punit Goenka
So two parts we have, Abneesh. Firstly, let me say that and you have heard me say this many times, whatever the market share, our aspiration would be in the next one or two years, I will never get satisfied with that also. We will continue to aspire to grow even beyond that. So I don’t put a number. We aspire to aim for the sky. And even on that journey, we may not reach the sky, but at least we will reach somewhere beyond what we are doing. So that will continue to be our DNA of how we operate.
In terms of consolidation, let’s break it up into two parts. One is the linear business. As you will agree, we competed with both Disney Star and Viacom independently. By them coming together nothing much changes, except that they may have a little bit more leverage on the advertising dollars that they can come on given that they may have a significantly higher market share. So that is the only part where I can comment on.
On subscription side, you know it’s regulated, so there is nothing that’s going to change that — from that perspective. On the digital side, as I understand, and I may be right, may be wrong, their entire strategy is sports focused, whereas our strategy is completely entertainment focused. And therefore, I do not think that we are really competing in that space or that segment because as I have maintained multiple times that we are not going to enter the sports business very aggressively.
Abneesh Roy
Sure. Thanks. That’s all from my side. Thank you.
Mahesh Pratap Singh
Thanks, Abneesh.
Operator
Thank you. The next question is from the line of Abhisek Banerjee with ICICI Securities. Please go ahead.
Abhisek Banerjee
Yeah. Hi. Thanks for the opportunity and congratulations on a good set of numbers. Sir, first question is with regards to how are you looking at ad revenues going forward? We have heard some mix commentary from FMCG guys with regards to how the rural demand is shaping up. And given that this quarter or towards the end, you would have seen some sort of traction that reached towards the festive season. If you could you just give us some color, that would be very helpful.
Punit Goenka
Mahesh, do you want to take it?
Mahesh Pratap Singh
Sure. So Abhisek, on advertising side, we’ve seen — after a fairly muted July, August, we’ve seen some pickup in September. And we see that continuing in the festive season. So like Mukund alluded in his comments, we are quite optimistic about pickup in festive season. But I think the bigger question, which we are slightly cautious and we want to monitor is how does the spike settle down once we are beyond festive season. There’s a bit of tactical nature in spending as opposed to longer-term brand building kind of spending and so on. So we need to see how this plays out and settles down, reasonably confident that the festive season Q3 will be better than Q2 because the direction is climbing up. Q4 and beyond, we still want to be watched slightly more a couple of months and then take a view.
Abhisek Banerjee
Got it. With regards to the ZEE5 business, if I see that the incremental revenue, whatever you are earning on a sequential basis, that is kind of going into EBITDA loss reduction. So I mean, is this trend likely to continue for at least the medium term over the next couple of years?
Punit Goenka
Yes, Abhisek. As Mukund was talking about, we do expect that the trend towards the downward trajectory of the losses reducing would continue. Obviously, we have to monitor the business on a quarterly basis. There may be sometimes when we choose to invest in the business, which could have some amount of variation. But the overall trajectory would be in line with what we are demonstrating for the last three quarters.
Abhisek Banerjee
Understood. So — and I think you also mentioned about some salary increments being affected. So with regards to the employee cost, what kind of inflation should one kind of price in going ahead now?
Punit Goenka
We don’t share the data, Abhisek, but you can pick it up from our…
Mahesh Pratap Singh
So Abhisek, if I got your question right, you’re saying what’s — how should we think of the employee cost going forward?
Abhisek Banerjee
Right, yeah. At least from a Y-o-Y basis, yeah.
Mahesh Pratap Singh
Yeah. Look, from a Q2 standpoint, you already have one month of increment in the numbers in that sense because as Punit — as Mukund alluded, these were effective 1st September. So to that extent, the one month of cost is already in the numbers. Yes, you should think of a little bit of effect of that coming in. But also keep in mind that our efficiencies have been coming in during the course of Q2 and you may not have had everything full quarter impact coming in and so on, so build that. I mean, it will be a little bit of a modeling. We’re not in a position to give you a specific number. But only thing we leave with is there’s a fairly high degree of control in cost in general, and you’d see that reflect as we move forward as well. That basic fabric is not getting changed in any way.
Abhisek Banerjee
Understood. Sir, so does that mean that the cost rationalization prospect at least from an employee cost perspective is over as in are more people churning out or has that kind of stabilized as of now?
Punit Goenka
So Abhisek, whatever the cost realization has to happen has happened already in the business and including on the people side. Going forward, as any business has churn in employee, we will have those regular churns that happen, but that’s part of our day-to-day life.
Abhisek Banerjee
Got it. So the 18%, 20% margin guidance that you’re talking about or rather aspiration that you’re talking about, that is with regards to increasing revenue contributing to that margin expansion?
Punit Goenka
Absolutely. Yes.
Abhisek Banerjee
Okay. Perfect. Thank you so much. Thank you for the answers.
Punit Goenka
Thank you.
Operator
Thank you. The next question is from the line of Umang Mehta from Kotak Securities. Please go ahead.
Umang Mehta
Yeah. Thanks for the opportunity and congrats on the margin gain. Just wanted to check, you mentioned about resuming investment in movies. Would it be possible to give any specific number or any commitment you’ve made internally?
Punit Goenka
So it’s already part of our working capital, Umang. So I don’t think you’ll see any incremental working capital increase on that account. So we’ll manage within that part. And as Mukund talked about, our objective will be to keep bringing this inventory and advances levels around further. So we will manage our entire thing that is the film production also forms part of the same inventory that we are talking about. So we will continue to operate on that. I will not be in a position to give you a specific number because we don’t disclose that for competitive reasons.
Umang Mehta
Got it. Understood. And secondly on ZEE5, there was a media article wherein it was mentioned about some talks with Airtel, you are already there with Vodafone. I mean can they — will this be substantial in terms of based on your past experiences?
Punit Goenka
We are in active dialogue with all our B2B distribution partners. And it will be difficult for me to say that it will be substantial or not. Obviously, them being one of the largest telcos in the country, based on the deal that we do, will have an impact on the ZEE5 numbers.
Umang Mehta
Got it. And there’s one last one on the fund deployment. So Mr. Galgali did mention that they are evaluating a few areas, but possible to give any more color on what you are evaluating?
Punit Goenka
I will ask Vikas to answer this.
Unidentified Speaker
So as you said, we have been evaluating a couple of opportunities, but nothing has materialized so far. So we are not at that stage where we can share any concrete information with you or anything meaningful. But we will keep evaluating those opportunities, and we will remain opportunistic while deploying this capital and, of course, conscious of value accretion out there.
Punit Goenka
But just to give you a perspective to add to what Vikas said, it is in the domain of entertainment genre that we operate. We are not looking at going beyond that business at all in any manner.
Umang Mehta
Got it. Helpful. Thank you so much and all the best, everyone.
Mahesh Pratap Singh
Thanks, Umang.
Operator
Thank you. The next question is from the line of Abhishek Kumar from JM Financial Limited. Please go ahead.
Abhishek Kumar
Yeah. Good evening. Thanks for taking my question. First is a very high-level question, Punit. I just wanted to get your view on this linear TV versus digital from an ad budget allocation point of view? I mean, the ad spend for linear TV has been soft for variety of reasons for almost two, three years now. The concern, is it really structural or is it just because of rural recovery et cetera? Do you think linear TV from a market share perspective still as relevant as it was a couple of years back, and therefore, just as percentage of overall pie, it can go back to where it used to be?
Punit Goenka
So Abhishek, I think it’s not a simple answer, so I try and dissect it for you all the same. So linear television will remain relevant in this country for a long, long period of time. We are far from the reach that linear TV provides. Digital in its best case from would be at half of what linear TV does deliver today. And secondly, if you look at most of the digital advertising, it’s largely transaction based. Most of the advertising on television or linear business is brand-building based, and therefore, if a brand wants to advertise to build itself, they will have to continue to focus on the linear business because the reach that we provide is far greater than any digital platform in this country. Forget my own, I’m talking about any digital platform in this country.
Secondly, you should also look at the digital numbers by stripping them off. There are two aspects to digital in this country. One is the search as well as the social media. So if you can strip that out and look at only the video part of the consumption on digital business, the revenues on linear business are much, much — multiples of — multiple times higher than what digital can offer. And that’s what we truly believe that India will always remain a TV and a digital market, it will not be a TV or a digital market, unlike the western parts of the world that you may be referring to.
Abhishek Kumar
Sure. Maybe a related question and more relevant probably for Zee Music. A lot of other players trying to monetize their content library by partnering with some of these digital platforms. We having such a large library of content, both in cinema and music, do we have — I mean we know YouTube, but otherwise, do we partner with some of the music apps, platforms, et cetera, to…
Punit Goenka
Yes, we do partner with most of them. We are — when it comes to the music business, we are pure publishers. We are not creating platforms of our own unlike ZEE5, and therefore, we do license our content to most of the digital platforms that exist, plus we do license our content to even linear platforms that want to use our music for their content creation, et cetera.
Abhishek Kumar
Okay. Staying on Zee Music, we are the second largest, some of the other listed music players. The market cap is closer to our market cap. Any plan to start disclosing some of the financials around Zee Music so that investors and analysts can appreciate the value of that business a little more?
Punit Goenka
Certainly, I have maintained at the right time, once the market stabilize, we will start reporting our segmental this thing, but it’s not the right time today, and therefore, we are not doing it yet. But you should certainly expect that to come from us in the current future.
Abhishek Kumar
Sure. One last question on capital allocation. Now with free cash flow improving, any thoughts on going back to a formal dividend policy that we used to have earlier? Or is it still too early? We have a lot more areas to invest in.
Punit Goenka
It’s certainly something that we will take to the Board for consideration. We, as you know, are paying out 100% dividend this year, which is, again, different from what has happened in the last couple of years. But certainly, we’ll be going back to the Board to look at the dividend policy and, hopefully, reinstate it back, given the, as you rightly said our cash flow position.
Abhishek Kumar
All right. That’s all from my side. Thank you and all the best.
Punit Goenka
Thank you very much.
Mahesh Pratap Singh
Thanks, Abhishek.
Operator
The next question is from the line of Arun Prasath from Avendus Spark. Please go ahead.
Arun Prasath
Good evening, everyone. Thanks for the opportunity. My first question is on the, again, content spend. Punit, I remember that you telling us that when you are increasing the content spend a few quarters ago, the benefit of that content spend will come a few quarters later. Isn’t it true for when we decrease the content spend as well because this should reflect in our share a few quarters later? So is it the right way to think?
Punit Goenka
No, Arun, the fact of the matter is that despite whatever little spends we have cut on content, both on the linear and digital side, we have seen market share gains on both sides. So it’s not completely a mathematical equation, although sometimes when you get some extra content wrong, it could seem like that. But as I said earlier, that wherever required, we may up our investment if needed for the business, even if it means that margins may take a little bit longer to deliver.
Arun Prasath
Okay. All right. And so does it mean is there — still there is some room to cut some spends given that it’s not — the market share seems to be inelastic to the content spend at this point of time at this level?
Punit Goenka
No, Arun. I don’t think there’s any more room for us to cut. In fact, you should expect inflationary growth to happen from there.
Arun Prasath
Okay. Understood. Secondly, on digital. I mean, you alluded to the fact that competition is primarily in sports, but we do not operate in that. So — but the fact of the matter is that primarily you’re competing to grab the people’s time, whether it is sports or say GSE. So how should we position ourselves now that even in the first half, if you see ZEE5 revenues kind of flat, maybe because we have spent — cut the content or maybe because the competition is gaining. So how should we look at the overall — what is your aspiration in ZEE5 right now, given the nature of the competition and how people are spending their time in the digital?
Punit Goenka
So Arun, our aspiration for any business that we are in, including the digital business will be in the top two categories. And right now, we are probably number four or number five. And so step by step, we want to grow and reach higher. Having said that, while — yes, you are right that we are in the business for grabbing the time of people and their space of mind, et cetera, but we have effectively done that in the linear business itself, right? And therefore, I don’t see any reason why that can’t be repeated in the digital part of the business.
And also keep in mind that the sports business is very volatile. It’s only when you have a big event that’s happening that they attract viewership. Other than that, it is a regular content that gets consumed. And that’s the game that we want to play out. And we will continue do that. In fact, during those high-ticket sports, this thing, we don’t even go out and put any high-ticket content of our own. We wait for those things to drive down before we come out with our own top-ticket shows.
Arun Prasath
Okay. Just to get a clarification, what will drive the ZEE5 revenue? Now most of the benefit is coming out of the cost, which has some finite limitation. So profitability has to come from revenue growth. So what will drive this going forward?
Punit Goenka
It’s more subscribers. We have to go and get more subscribers. That’s the only way to grow this. And of course, over a period time, we’ll take pricing also increased. Because today, we are the most cost-efficient OTT platform in the country compared to all our competitors.
Arun Prasath
Have we grown the subscriber base in the last few quatres? Because that disclosure is — kind of, unfortunately is not there. So we are not able to gauge from that how the performance is coming.
Mahesh Pratap Singh
We — yes, we’ve stopped disclosing, but even back then, Arun, we were not disclosing paying subscribers. We were disclosing MAU, DAU kind of metrics, right? So yes, I mean, without giving you numbers, which we can’t, our number of subscribers have grown both quarter-on-quarter as well as year-on-year, number of paying subscribers. So both — and not just the usage metric, this is the usage metric. But even when you look at the engagement metric, which we track in terms of watch time, et cetera, that has also grown at a pretty healthy clip.
Now of course, the question that could be saying, look, if there’s growth, why the revenue growth is slightly slower than what it is, and that’s a function of mix change in terms of where the subscriber is coming from between different pay models and so on. And a roundabout way for you, I mean, as an outside, while we don’t report it, if you go and look at, let’s say, similar web, app any kind of third-party metrics, you would see the trends of usage, et cetera, independently.
Arun Prasath
Okay. Great. Understood. Thanks, Mahesh and Punit. All the best.
Mahesh Pratap Singh
Thanks, Arun.
Punit Goenka
Thank you.
Operator
The next question is from the line of Jinesh Joshi from Prabhudas Lilladher Capital. Please go ahead.
Jinesh Joshi
Yeah. Thanks for the opportunity. Sir, I just wanted one small clarification on the operational cost side. I mean, if I look at the last two quarters, we have seen a decline of about 8% to 9%. So is it solely led by cutting the content spend? Or has there been any change in the amortization policy be it respect to shows, music or, for example, movies?
Punit Goenka
I will request Mukund to start, and then I can jump in if I need to.
Mukund Galgali
So Mr. Joshi, there is — let me clarify, there is no change in any amortization policy as far as content is concerned. That remains to be consistent in line with what we have been doing. Most of the cost optimization could — is mostly targeted at fixed costs. And as far as programming cost, which is variable in nature, I mean, it is something which we we’ll continue to deploy and invest in from time to time depending on the opportunities.
Jinesh Joshi
Noted. Sir, one last question from my side. If I look at our linear TV EBITDA margin after knocking off the ZEE5 losses, now that has improved considerably to about 27% in this quarter, if I compare it with the previous three quarters. So any specific initiatives do you want to share that we have taken on the linear TV side, which has led to such kind of an improvement despite the decline in the ad revenue?
Punit Goenka
So the linear business, Joshi, has always been quite profitable for us. And we do expect that the margins will only continue to improve there. As we start to see headwinds in the advertising growth, you will see only improvement coming in the margin structure of the linear business. So I don’t think there’s any specific thing that we have done structurally for us to deliver on this. It is pretty much business as usual. Of course, we have to keep finding efficiencies and delivering better content for us to continuously keep improving on that. And that’s where what we talked about the market share gain of 100 basis points over quarter-on-quarter will certainly help us as and when the headwinds turn towards benefit and growth, we should be able to take advantage of that going forward.
Jinesh Joshi
Sure, sir. Okay. Thank you. Thank you so much.
Punit Goenka
Thank you.
Mahesh Pratap Singh
Thanks, Jinesh.
Operator
The next question is from the line by Akshat Bairathi with RSPN Ventures. Please go ahead.
Akshat Bairathi
Hi, sir. Thank you for taking my question. So my first question is on the Star case that the Star has filed, an arbitration case. So can you share some details with us? What is the current status of it? And how much will it cost us to fight it in the court?
Punit Goenka
The second part, definitely, Akshat, I will not be able to give you an answer because these legal cases are very prolonged and can be expensive. As far as the status of that case is concerned, they have put the claim that you may have seen already in the press. Now we are supposed to respond to that by end of this quarter, which we’ll be doing. And then, of course, the proceedings will start in the arbitration courts in London that we are fully geared to address.
Akshat Bairathi
Got it, sir. My second question is on the planned movie releases. So can you give us some pipeline of the movie releases coming in the H2 and Q3 as well?
Punit Goenka
So we have several movies coming in the H2. Of course, I will request Mahesh and Mukund to answer this.
Mukund Galgali
So the — this is Mukund here. And Akshat, the big ticket items, which we have in H2, in terms of movie releases is Emergency, which got rescheduled. But otherwise, Emergency is big movie and Game Changer is a south movie of Ram Charan, and that is another big ticket release, which is planned in H2.
Punit Goenka
And then, of course, we have a whole slew of small to mid films.
Akshat Bairathi
Got it, sir. Sir, my last question is on the — is that, do we have any internal targets for ZEE5 EBITDA breakeven? And can you share it with us?
Punit Goenka
Akshat, that’s a thing that we struggle with on a daily base. I will just reiterate what I said that the trajectory of losses reduction is well on its way. But given the competitive intensity of the market, right now, we will not be able to give you a date when we will break even. But certainly, it will be within the horizon that you as an investor or an analyst would be able to model in your business plan.
Mahesh Pratap Singh
And just to add to what Punit said, Akshat, when we had sort of given our aspiration of 18% to 20% EBITDA margin, we’ve worked a certain range of scenarios in that to be able to remain competitive in ZEE5, invest in what the market environment could look like and still have relevance. So be assured that when we talk about margin improvement from where we are to where we are going, that margin improvement journey is not hinged upon ZEE5 breaking even.
Akshat Bairathi
Got it, sir. Thank you so much and all the best.
Punit Goenka
Thank you, Akshat.
Operator
Thank you. The next question is from the line of Sameer Deshpande with Fair Deal Investment. Please go ahead.
Sameer Deshpande
Hello. Am I audible?
Punit Goenka
Yes, you are. Please go ahead.
Sameer Deshpande
Congratulations, Mr. Goenka and the team for the spirited turnaround you can say over the last six months.
Punit Goenka
Thank you very much, Sameer.
Sameer Deshpande
And I hope the things keep on improving going forward. Now in half two, in the current release, they have mentioned our revenue growth target is about 8% to 10% overall CAGR with the current portfolio. So does it mean that it doesn’t include anything from the movie releases, et cetera, which can be a bonus on that?
Punit Goenka
I will request Mahesh to answer that.
Mahesh Pratap Singh
So Mr. Deshpande, that was — you’re referring to the initial slide. That’s the statement of aspiration we had laid out. That’s really a longer-term view of the business, which includes — when we say current portfolio, which includes all four businesses, linear, digital, movies and music. And what we’re implying there is, look, as a portfolio of those four businesses put together, we would really be aspiring for 8% to 10% sort of revenue CAGR for the next few years. Subscription is already there, as we’ve said on that slide at about 9%. And that’s really what we mean by that statement. It’s not not necessarily an H2 — it’s not necessarily H2 guidance, it’s more a longer-term revenue CAGR aspiration.
Punit Goenka
And as Mahesh said, this is a combination of all the four verticals. It’s not attributable to any one vertical. It’s the overall organization target that we are taking.
Sameer Deshpande
Okay. And now in this — so in half two — in the first half, these movie releases, et cetera, are not that much. In the half two, we expect that income to be significantly better?
Punit Goenka
Yes, sir, we do.
Sameer Deshpande
And another thing is this independent committee report, which has been given on 8 of October by the Board. So now it will — will it be binding on SEBI?
Mukund Galgali
Mr. Deshpande, this is Mukund here. So that report has been submitted to the Board, and it will not be binding on SEBI.
Sameer Deshpande
But hope it will…
Punit Goenka
SEBI’s [Phonetic] investigation is independent of that, sir. This was a report that — this was a process that the Board had instituted within the organization to satisfy themselves that nothing of whatever allegations SEBI has made are of any relevance [Indecipherable] so it’s restricted to that.
Sameer Deshpande
Maybe it will help them close the case early, let’s hope.
Punit Goenka
I’m always an optimist, let’s see.
Sameer Deshpande
Okay. Thank you and all the best.
Mahesh Pratap Singh
Thanks, Mr. Deshpande.
Punit Goenka
Thank you.
Operator
Thank you. The next question is from the line of Navid Virani with Bastion Research. Please go ahead.
Navid Virani
Hello. Am I audible?
Punit Goenka
Yes. Please go ahead.
Navid Virani
Yeah. Thank you for the opportunity. Two questions. First one is on movies. So we have said that we are going to intensify investments in movies which we have not done in the last few years. So I just wanted to understand that are we working with a particular ticket size in mind beyond which we are unwilling to go as far as movies is concerned? I mean just trying to understand that even if, let’s say, a movie fails, it doesn’t really hurt us that much.
Punit Goenka
So Navid, as I said earlier, the movie production business is a bit risky business. But we do evaluate every opportunity on films basis what we believe that it can do both on box office as well as on the other revenue streams, whether it’s digital or television and music. So we have not put a limit to the ticket size. But generally, if you look at what Mukund talked about in the second half of the year, we only have two big-ticket films coming out. So it’s a combination and a portfolio approach that we use. We do multiple films, few may be high-ticket, and the rest would be medium to small size. Mukund, you want to add?
Mukund Galgali
Yeah. And Mr. Navid, I would also like to add that from a risk mitigation point of view, we also try to see that there is — these are underwritten by digital and linear commitments. So the exposure is not only linked to the theatrical box office.
Navid Virani
Understood. That’s helpful. Second one is on the fundraise. From what I’m able to see right now in the presentation, we have only raised the fractional of funds which we have set up [Indecipherable]. So is there a thought process on the further fundraise? Is there any timeline in place or that fundraise will be contingent to opportunities coming our way?
Mahesh Pratap Singh
So. Hi. As we have said, there’s — we have been evaluating a few opportunities, but nothing has materialized. So right now, we have no plans of calling in or going for another tranche in the immediate future. But yeah, to some extent, you are right, it depends on the opportunities as we come across and when they materialize.
Navid Virani
Okay. That’s it from my side. Thank you for the opportunity and wish you all the best.
Mahesh Pratap Singh
Thanks.
Punit Goenka
Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question, and this concludes the question-and-answer session. I now hand the conference over to Mr. Mahesh Pratap Singh for his closing comments.
Mahesh Pratap Singh
Thank you, everyone. Thanks for joining us today. We hope all your questions were answered. Do feel free to reach out to us if you have any further follow-up questions. We’ll be available and look forward to speaking to you. Thank you so much. Wishing you a great festive season ahead and have a great weekend. Thank you.
Operator
[Operator Closing Remarks]