Zee Entertainment Enterprises Limited (NSE: ZEEL) Q3 2025 Earnings Call dated Jan. 23, 2025
Corporate Participants:
Mahesh Pratap Singh — Head of Investor Relations
Punit Goenka — Chief Executive Officer
Mukund Galgali — Deputy Chief Executive Officer and Acting Chief Financial Officer
Vikas Somani — Head of Strategy, M&A and Business Development
Analysts:
Abneesh Roy — Analyst
Umang Mehta — Analyst
Jinesh Joshi — Analyst
Abhishek Kumar — Analyst
Chirag Maroo — Analyst
Akshat Bairathi — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Q3 FY ’25 Earnings Conference Call hosted by the Zee Entertainment Enterprises Limited. As a reminder all participant lines will be in a listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call please signal an operator by pressing then 0 on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mahesh Pratap Singh, Head of Investor Relations, Zee Entertainment Enterprises Limited. Thank you, and over to you, sir.
Mahesh Pratap Singh — Head of Investor Relations
Thank you, Sajal. Hi, everyone, and welcome to our Q3 FY ’25 earnings discussion. We have with us today our CEO, Mr. Punit Goenka, along with senior management team. We’ll start with the opening remarks from Mr. Goenka, followed by commentary on operating and financial performance by Mr. Mukund Galgali, Deputy CEO and CFO. We’ll subsequently open the floor for questions and answers. Before we get started, I’d like to remind everyone on the call that some of the statements made or discussed today 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.
Punit Goenka — Chief Executive Officer
Thank you, Mahesh. Mr. Good evening, everyone. Warm wishes to all of you for a wonderful 2025. Thank you for joining us this evening to discuss the company’s performance in the third quarter of the financial year 2024-2025. Today, I would like to share some macro level insights about the company’s performance during the quarter and the trends witnessed by the industry. Post this, Mukund will take you through the granular details of our performance and the key numbers. As you would have noted, the company’s focus during the first 3 quarters of this fiscal was around strengthening the fundamentals of the business and pivoting strategies to enhance the performance and profitability levels. We have implemented several action-oriented steps that have translated in our year-on-year margin expansion. The fiscal prudence exercised across the company has served us well enabling us to maintain a firm grip on the margin profile and balance sheet. The first phase of our overall strategic road map centered around costs and margins as we successfully executed and our energies are focused towards boosting growth and performance. That said, the overall macroeconomic environment remains challenging. The green shoots we witnessed during the beginning of the quarter did not pick up the required pace to drive a positive growth momentum. This coupled with the muted spending by FMCG brands in a festive quarter, further slowed the pace of growth for the industry at large. Although there was a marginal pickup in the rural recovery, the lackluster sentiment in the urban market led to weaker demand and impeded significant growth. This in turn also impacted our advertising revenues during the quarter. However, improving consumption is expected to drive a positive momentum for recovery going forward.
We are hopeful that the upcoming union budget will encompass pertinent steps by the Honorable Finance Minister to revive the consumption cycle in order to spur the industry. On the back of these factors, we remain optimistic about a gradual recovery in the new fiscal that will enable us to capitalize on the increased spending by advertisers. During the quarter, subscription revenues continued to post a healthy growth. In line with the Telecom Regulatory Authority of India Tariff Regulations, we have published a new reference interconnect offer that reflects the competitive pricing approach adopted by the company. We expect subscription revenues to continue growing after a couple of quarters of implementation. ZEE5 has also enabled us to consistently move the needle on subscriptions and margins. We are taking concrete steps to enhance the growth on digital post a thorough calibration of the cost structure and we should be able to talk more about that in the coming few quarters. On the linear side, our language markets continue to maintain a strong foothold and post positive results. We are also witnessing an uptick in the Marathi market, where we have invested a significant amount of time and energy over the last few quarters to identify and fill in the required gaps. We are focused towards strengthening our Hindi programming and considerable investments are being made in content to enhance the value for our customers. Speaking about our music and movies business, Zee Music Company has maintained healthy profitability and market relevance. However, it was a lean quarter for the movie business. That said, we have key releases lined up during the fourth quarter, and these will reflect in our performance going forward. At a macro level, we are maintaining a sharp eye on the profitability levels and investing for long-term growth. We have identified the gaps. And our teams are working around the clock to innovate and build solutions that will enhance the company’s competitive advantage in the market. The company remains on firm footing to drive robust growth in the future with a balanced investment approach. The lateral leadership team structure is enabling the company to direct concerted efforts towards each business segment, and we remain optimistic about firing on all engines as we move forward. On that note, I would like to hand over the call to Mukund to elaborate on the company’s financial and operating metrics during the quarter. I look forward to interacting with you all during the Q&A session later. Thank you. Over to you, Mukund.
Mukund Galgali — Deputy Chief Executive Officer and Acting Chief Financial Officer
Thank you, Punit. Good evening, everyone. And it’s great to connect with all of you. I’ll briefly touch upon some of the key financial highlights during the quarter. We are pleased with the continued progress in the business as reflected in healthy profitability amidst the challenging macro environment. Q3 FY ’25 was a soft quarter for advertising growth, wherein broad consumption slowdown outweighed festive season pickup. While we did see some pickup in October closer to Diwali, the momentum quickly cooled down in November, December. So from our vantage point, the impact of this consumption weakness and resultant FMCG ad spend slowdown has been more pronounced in the urban areas, and in the heartland. While the south cluster or the other language markets are still holding relatively better. As a result, our ad revenues were down 4% Q-o-Q — were up 4% Q-o-Q, sorry, and still down 8% Y-o-Y. We are continuing to look at ways to maximize ad revenues in this environment and will remain cautious in the near term on the pace of our ad revenue growth. Through this phase, the subscription revenue momentum has held us in good stead. It has allowed us to offset the macro environment-led softness in our ad revenues. We have been able to derive healthy Y-o-Y growth in subscription revenues and our 9 months FY ’25 subscription revenues are up 8.2%. We have also, as Punit alluded, published the new channel tariff, which will help us to continue growth after a couple of quarters of implementation. On the broadcasting business, the TV industry landscape remains healthy. And the overall industry-wide TV viewership has increased by 1.4%. Further, we continue to be a strong #2 Entertainment Network in India, and we have gained 40 bps share to 16.9% compared to the same period last year. And as Punit mentioned, again, Zee Marathi has shown consistent progress post our interventions. And Zee Tamil has also gained healthy share on Y-o-Y basis. On the digital side, ZEE5 has further narrowed its operating losses in this quarter. Its EBITDA loss is lower by INR22.6 crores Q-o-Q and 107.8 crores Y-o-Y basis. While the cost structure and profitability has been a key focus area for us in this business, we also continue to make steady progress on the usage and engagement KPIs. Both the number of subscribers and the average watch time during this quarter has grown on a Y-o-Y basis. ZEE5 Y-o-Y growth — revenue growth of 8% is slightly impacted due to a delay in the renewal of a B2B deal, which completed its term in September to 2024, and the new commercials are still being discussed. As we have shared before in ZEE5, we remain sharply focused on balancing — on maintaining a balanced cost structure and driving return on investments to sustain long-term growth, and that rigor also applies to how we assess and evaluate each revenue opportunity. We want to secure the right size for our content and digital offering and would not like to give into the short-term temptation to chase near-term growth on any cost, which may undermine our long-term monetization potential. Our original content in ZEE5 continues to resonate well with the viewers. We have released 14 shows and movies during this quarter, which includes 7 original and include some of them, namely Mithya Season 2, Aindham Vedham, which is a southern language show, Despatch, Vedaa, Dharmaveer 2, and a few others.
Coming to the movie business. Quarter 3 FY ’25 was a lean calendar for us, as Punit mentioned. And given the nature of this business, there is always going to be some quarterly peaks and troughs. During this quarter, we released five movies, two Hindi and three regionals, which were mainly — which were all distribution deals. And therefore, the other sales and services revenues have shown a decline of 43% Y-o-Y due to lower syndication and a leaner movie lineup. On our music business, Zee Music Company remains our #2 music channel with around 160 million subscribers of YouTube and over 43 billion total video views during the quarter, driven by the new age music catalog and our rich library. Within the music business, our profitability remains fairly healthy. And in the near term, we are being selective in pursuing growth given the changes in the music industry. Given the changes, the music industry is witnessing and around narrowing, around fewer number of streaming players changing revenue model and higher cost of music rights currently. So now moving to the costs and profitability of the company. On an overall basis, our operating cost has declined by 10% Y-o-Y due to overall efficient execution, lower programming and technology costs and continued cost optimization in ZEE5. We are also very mindful about balancing our cost optimization efforts with longer-term investment needs of the business, and we are taking a very nuanced approach in this entire exercise. While we have reduced our overall cost and driven efficiencies in specific areas like content, technology, et cetera, we would also notice that we have invested back in specific areas to strengthen the growth fabric of the business. Our advertising and publicity expenses for the quarter and the 9 months period are hence higher, reflecting our continued investments in marketing. Our employee expenses have increased on a Q-o-Q basis as we have rolled out wage increments from September. Effective cost management in a soft advertising environment has helped us maintain our momentum on profitability and with our EBITDA margins up 10 bps on a Q-o-Q basis and 590 bps on a Y-o-Y basis. During this quarter, we have also made a provision of INR809 million based on the arbitration outcome related to Margo, the details of which can be found in the notes to accounts in the published results. This is a non-cash impact and — but it has adversely impacted our reported net profit. PAT from continued operations for the quarter came in at INR1,636 million, which shows a robust increase of 207% on a Y-o-Y basis, reflecting a significant progress on business fundamentals and a streamlined cost base. On the balance sheet, our focused efforts have strengthened our liquidity and financial position. During quarter 3 FY ’25, we have paid INR1 per share dividend. The cash and treasury investments as of December ’24 stood at INR17 billion, including the INR2 billion from FCCB proceeds. The cash and treasury investments include cash balance of INR4.2 billion and FDs of INR7.1 billion and investment in mutual funds of INR5.7 billion. Our content inventory have continued to decline, driven by optimized acquisition. December ’24 content inventory, advances and deposits were INR69.9 billion, lower — were at INR69.9 billion, lower by INR4.3 billion on a YTD basis. I’m also happy to share the progress we have made in our ESG journey. And in November ’24, we have published our first ESG report, highlighting our strong ESG practices and disclosures. This report is available on the website of the company, and I would encourage each one of you to look through that. Our ESG progress is also reflecting in our improved third-party external ESG ratings and scores. Going forward, we will continue to accelerate our ESG agenda. Moving into quarter 4, FY ’25 and next financial year ’26. Having made good strides in — on the margin front, accelerating revenue growth remains our key priority. We feel good about the levers in the business to deliver sustained profitability while making room for growth-related investments. However, as mentioned earlier, the path of margin expansion now has a higher degree of dependency on growth and operating leverage. Quarter 4 will also see a busier movie calendar. And while that should aid the revenue growth, it may also bring some unpredictability on the margins depending on the commercial success of the movie. Having said that, we firmly remain committed to our stated EBITDA margin aspirations by the end of FY ’26 and believe we will continue to balance the dual objective of stepping up growth while managing costs very judiciously. Back to you, Mahesh.
Mahesh Pratap Singh — Head of Investor Relations
Thanks, Mukund. We can now open the call for questions and answers.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone telephone. If you wish to remove yourself from the question queue you may press star and two. Participants are requested to use handsets while asking a question. Participants are requested to restrict their questions to two per participant, if you have a follow up question I would request you to rejoin the queue. Ladies and gentleman we will wait for a moment while the question queue assembles. The first question is from the line of Abneesh Roy from Nuvama Wealth and Investment Limited.
Abneesh Roy
Congrats on the margin expansion. My first question is on the movie production business and music rights business choosing between the two for you as a company. So movie production business in FY ’25 has been extremely challenging in terms of Hindi movies. Most have not done well, few sporadic successes are there only. And your latest movie in Q4 also, till now has been very muted response. So why not reduce the focus on a more riskier part of the business, and flow that towards, say, music rights business, you did mention that music rights, you want to be a bit cautious. Given the landscape change and the music rights are going more expensive. So wanted to understand what is the landscape change? Is it that the foreign players are entering the Indian music rights industry more aggressively? Or is it a listed player now getting more aggressive? So if you could elaborate on these two aspects.
Punit Goenka
Yes, Abneesh. So yes, I think, as Mukund mentioned in his opening remarks, we do evaluate the mix between movies and music, based on what the return profiles are going to be. So the risk-reward ratios are evaluated on a regular basis, on a per content basis as well. So we do, do it and — but we do have to also look at the fact that the movies business also works as a feeder business for us. And our basic requirement of what we require internally has to be met. So that’s on that part. On the music part, yes, as we stated that the music rights are getting a bit aggressive in the market. But from what I see, is largely on — from the domestic players itself, I do not see that much aggression yet from the international players, but you’ll never know what may change in the coming future.
Abneesh Roy
But Punit sir, further elaborating on that, I understand movie production does feed into your own linear TV and OTT. And we have seen now that the movie satellite rights and TV rights are also correcting, because of the consolidation in terms of the number of players, which is a good thing. But on the other hand, if you see movie — the music business, clearly, subscription, that part towards paid subscription, that is improving, but still not fully achieved. So in that context, from a more predictable and viability business, isn’t music making more sense for you? I understand the listed music company is now getting more aggressive and they are pure play, and it’s the main business for them. But your presence and your brand is also very strong in the music business. So from a viability and predictability, irrespective of whether it’s feeder business to your linear TV is there or not, shouldn’t you focus more on that also?
Punit Goenka
So, Abneesh, it does not mean that we do not focus on that. It’s about capital allocation to which business, how we do it and we do not take money away from one vertical for the benefit of another vertical. So rest assured, our focus on the music business will not shift. Of course, we are going to be even more cautious on the Hindi Movie segment that you talked about. I think, on the language side, the movies are still doing reasonably well. So we will continue our film production business. How much we invest, in which language is something that we evaluate on a monthly and a quarterly basis.
Abneesh Roy
Sir, my second and last question is on the revenue acceleration. You have done well on the gross margin, EBITDA margin, good delivery, I would say, ahead of expectation. And you did mention that now the margin improvement will be more a function of revenue acceleration or revenue growth coming back in terms of at least advertising subscription, you are doing well. So my question on advertising is essentially two. One is FMCG, clearly, rural is something more recovery will keep happening. And urban, clearly, two more quarters of slowdown is definitely there in terms of FMCG. As a proactive step in terms of rural FMCG advertising, say, local advertising or say any other proactive steps, are you doing something different to capture the rural recovery, given urban you can’t do much. That is the first part of the question? I have one more follow-on question on the advertising.
Punit Goenka
So, if you look at our entire language market, as Mukund talked about in his remarks, is coming from the function of both the performance of those language markets plus given the fact that retail is a very large part of those markets for us. And retail generally does focus a lot more on rural than purely on urban. Please.
Mahesh Pratap Singh
Also to add, Abneesh, on that question about advertising revenue. I think, there are other bits which we are doing in terms of, one, if there’s an opportunity to get revenues from other sectors or segments beyond FMCG, that’s one. The second thing you would notice in the numbers and we give you this split as well, that we’ve also focused while these are smaller bases, but just gives you a sense of how we are thinking this through. We’ve also focused very sharply on international ad sales for that matter. So if you look at — while the domestic ad sales have been slower, you look at our 9-month FY ’25 international ad sales Y-o-Y is up almost 20-plus percent, 22%. I think, what we’re trying to do is as we navigate the space, look at pockets of revenue. Punit alluded to, retail, other sectors also, if there are markets outside partnerships with, sort of, device takers or European markets, it’s international. So everything possible is what we’re doing. And our internal assessment suggests that our 9-month blended ad sales performance even in domestic is ahead of our peer group.
Abneesh Roy
Sir, on the advertising, two quick follow-up. One is international, there is a slowdown. Everyone is talking about Europe recession, et cetera. So is it that you’re doing well, because of soft base or something proactive you have done, if you could talk about it? Second is your market share in the linear TV has expanded. A clear consolidation. The #1 player now is part of a big conglomerate who have 10 other priorities. So my question is, specific is, now you are pure-play, a good #2 player in the linear TV and because the other player is part of conglomerate, and they are very big. And now they are sitting at a very strong dominant share. Would you see that as a positive? So because as I said, they have other priorities also as a conglomerate and you can always be a more of a niche and sharper and a faster execution. So I wanted to understand that from a competitive dynamics part of view, from an advertising part of view.
Punit Goenka
So I’ll answer the first one, Abneesh. If you look at in the international markets, while yes, you may consider that the slowdown is happening in certain markets, et cetera. But keep in mind that we are a niche player in those markets. And therefore, impact on us is very miniscule. Therefore, our growth is not only because of soft base, but also because we are going out and targeting specific advertisers that need to go after our diaspora or diaspora that we address even in markets like South Africa, etc. On the other one, it’s too early to comment, Abneesh, and I don’t think we can discuss every strategy on an open call. Maybe we can take that offline with you.
Abneesh Roy
No, more directionally, are you seeing some early signs that competitive pressure is reducing? One is, one player has gone, right? From a 4-player market or a 3-player market, now it is essentially one player lesser. So that clearly is there. Second, any early signs of this are you seeing in terms of any numbers?
Punit Goenka
It’s too early to comment, Abneesh. I think, maybe next quarter, we can talk a little bit more in depth of that.
Mahesh Pratap Singh
Also from a context standpoint, Abneesh, it’s been — for the whole industry, it’s been a smaller pie to that extent. So ad sales has not just been declining for us. It’s been declining for industry. So what the analysis or the trend line, which you’re saying, look, is the incremental flow getting consolidated lot more to top 2, 3 players hasn’t really played out. It’s a little bit more reverse situation where the pool has shrunk a little bit. So we’ll have to wait and see how this plays out. But like you would have seen even in last year FY ’24, our overall ad sales performance were ahead of the peers despite we having lesser exposure to genres like sports or other people having higher impact properties and so on. So I think I’d only leave it at the point that look, we are a much more hungry and nimble organization on the — when it really comes to driving this, and that won’t change now. We’ll have to see how the market pans itself out. But our competitiveness has been reflecting in our performance in the past, and you’ll continue to see that as we move forward as well.
Operator
The next question is from the line of Umang Mehta from Kotak Securities.
Umang Mehta
Yes. My question is on ZEE5. Now you mentioned that you’ve seen growth in subscribers. And you also mentioned that renewal — delay in renewal of a B2B deal led to lower growth. I believe you’ve taken price hike, right, at least, double digit. Would it be possible to split the growth in these three parts to make us understand better?
Punit Goenka
Umang, we have not taken any price hike in this quarter.
Umang Mehta
No. I mean, on a Y-o-Y basis, your plans are about INR100 more expensive, right, versus earlier? Is that correct?
Punit Goenka
Y-o-Y, yes, I think you’re right.
Mahesh Pratap Singh
Yes. So there’s some bit of that blended which flows through, Umang. But also keep in mind that year-on-year when you’re comparing your mix of customer profile is also very different from B2C to B2B. So the price side, which you’re talking about plays out in B2C part of it, but B2B is more a one-on-one negotiated conversation and so on. So a large part of what you’re seeing, the 8% growth could have been higher if the base is like-to-like, if you would have had the B2B deal. And bulk of this, I would say, is a function of usage or higher number of subscribers. Pricing would have been a factor in specifically B2C cohort, but not necessarily a huge factor when you really look at the blended picture.
Umang Mehta
Got it. That helps. And the second question was on your FCCB. So if any update on usage as well as when is the next tranche, if you can help us with anything incremental on that?
Punit Goenka
Vikas?
Vikas Somani
Yes. So the next tranche is due sometime in August. That’s where we’re expecting the next tranche to come. And we are — as we have told you in the previous calls also, we are evaluating opportunities where we can deploy, but we are very clear we’ll only deploy this money when we find opportunities which are value accretive. So we are still evaluating those, that’s work in progress.
Umang Mehta
Understood. And just, sorry, last one on subscription. So,you mentioned that you’ve taken price hikes and it could take a couple of quarters for it to reflect. Would it mean that in the meantime, we could see some moderation in subscription growth as base catches up?
Punit Goenka
No, no. The growth trajectory is already on its way, but the next level of growth may take a couple of quarters to kick in, is what it means.
Operator
The next question is from the line of Jinesh Joshi from PL Capital.
Jinesh Joshi
Sir, my question is on the RIO copy that we have filed recently. It appears that in some markets like Hindi, Marathi, Bangla, et cetera, the bookie prices have been revised downwards. So just wanted to know the reason behind it, given the fact that in some of these genres like, for example, Hindi, we launched about three new shows in the last quarter. And even in this quarter, CPTV have some new content come up, even in Marathi and Bangla, the recent quarter CPTV is that we have some new content coming up. So basically, this indicates that the monetization potential for these genres is good going ahead, given your content is lined up. So in that context, I mean, why is the pricing being revised downwards?
Punit Goenka
I’m not sure that where you’re getting that the price has been revised downwards.
Jinesh Joshi
I was just comparing the RIO copy that we filed recently with the earlier version.
Punit Goenka
Earlier version as in the one we filed last year?
Operator
Jinesh Joshi Prabhudas Lilladher Pvt
Right.
Punit Goenka
Okay. Then it could potentially be, Jinesh, a function of penetration versus pricing. And if by lowering the price, we get better penetration, that could be the only reason that would have happened. But I would recommend that Mahesh, take it up offline with you, that entire data of that granularity is not available in this room as we speak.
Mahesh Pratap Singh
And Jinesh, as you look at this, we’d encourage you to look at this more as a blended basis, because the teams would always take a nuanced call for market-to-market, region-to-region, channel-to-channel, depending on objective on reach versus monetization. And the comment which Mukund and Punit made in their opening remarks in terms, of as a blend trying to drive sort of a growth that you’ve seen in the past, is really the objective. It’s not necessarily the question that if I have had 9-month 8% sort of subscription revenue growth, every channel and genre would have given the similar number. There will always be slightly different objective depending on maturity of each region or channel or cluster. But we can discuss this more in detail, but I thought, I’d leave you with that color.
Jinesh Joshi
Sure. We’ll take this offline. My second question is on the ZEE5 B2B deal. Now if I heard you right, we mentioned that the deal ended in September. And I think, we are already 4 months through from that particular date. So just wanted to know what is the probability of renewal come through? And also, if you could name the telco, if possible?
Punit Goenka
Sorry, we can’t name the telco, Jinesh. And the probability of that is subject to us getting our right pricing that we want. So it’s about a negotiation, which is a commercial negotiation between two parties that are taking place. As and when that closes, we will disclose that, and you will get more color on that.
Jinesh Joshi
Sure. My last question is on the exceptional charge that we have recorded in this quarter. I mean, I am going through the footnote, which says that there is INR809 million of provisions for receivables. So does it mean that there is some recovery, which is pending. If yes, can you quantify what is the total outstanding amount? And if not, I mean, what does this exactly pertain to?
Mahesh Pratap Singh
So, Jinesh, as mentioned in the notes, — and it’s also detailed in the notes to accounts that, there was an arbitration claim, which was in process, and the claim has not been admitted by the arbitrator. And now this was against the government body and to avoid further litigation and protected legal proceedings, it has been decided. I mean, on a conservative basis, this has been provided in the books of accounts. So this was a claim receivable under arbitration.
Jinesh Joshi
So what is the total outstanding amount? Has complete amount being provided?
Mahesh Pratap Singh
Yes. Yes. 100%.
Operator
The next question is from the line of Abhishek Kumar from JM Financial.
Abhishek Kumar
First question is on, in November, the Board had outlined in two, three evaluation criteria. One of them was a dividend payout of 25% of consolidated PAT. So I was wondering, is that — can that be construed as a formal dividend policy or a formal policy will be rolled out sometime in the near future?
Mukund Galgali
Abhishek, the formal dividend policy is already available on our website. And this is the reiteration of our commitment to maintain that.
Abhishek Kumar
Okay. So it already states that we’ll be paying out 25% of…
Mukund Galgali
That’s right. Yes.
Mahesh Pratap Singh
We had skipped dividend in previous year, and this reaffirms our commitment to continue that path. So that’s really where this was.
Abhishek Kumar
Understood. The other criteria were around growth and margin for the next 4 quarters. Would you be in a position to give some more detail around that, what would be the number that the Board has set for the performance evaluation?
Punit Goenka
So Abhishek, we had recommended to the Board at the beginning of this financial year itself that by FY ’26, we will be targeting to get to 18% to 20% margin. And the Board had approved that, and we are working towards that same objective. On the growth part, it’s difficult to say right now given the macroeconomic situation, but quarter-on-quarter, we’ll give more color.
Abhishek Kumar
Sure. The second question is on ad. Very little we can do about the macro environment. But when we are speaking to some of these media buying agencies or FMCG companies, I just wanted to get your view on what are the kind of conversation — is FMCG players talking about reprioritizing their ad budget, given there is some constraint on the brand spend. Is that something they will relook at when things return or they have kind of shifted permanently to other channels. Any color around the conversation that we are having given the constrained environment that we are in?
Punit Goenka
No, difficult to say that. But my view is that generally, with the FMCGs, once the consumption cycle picks up, they will return with brand advertising as well. Right now, they are constrained with consumption of their own product itself, which is what is causing the lower spending with media.
Operator
The next question is from Chirag Maroo from Keynote Capital.
Chirag Maroo
Yes. Sir, I have one book-keeping question. I am able to see that we have almost INR900 crores plus DPA on books. Just wanted to know that will it be helping us to reduce our future effective tax rate going forward, which was around 30% in the last year?
Mukund Galgali
Yes. Chirag, so we are constantly monitoring our ETR. And as you can see, during this quarter also, it has come down. And we will — we see potential in utilizing the DTA, deferred tax assets, to keep our ETR lower. Yes.
Chirag Maroo
What can be the ETR expected for FY ’25?
Mukund Galgali
We can’t give you a number, but I mean, we can connect offline, but we can’t really disclose any particular number right now.
Chirag Maroo
Okay. So second question, I just wanted to understand, as you say that the — as consumption would pick up for FMCG, then the ad spend will flow through. Just wanted to know, is there any change in mix of ad spends from — in the FMCG from television to digital taking place at this moment on a broad level?
Punit Goenka
Yes. Certainly. Because, they are also driving consumption, right? So they are going after transaction-based advertising today. So, I don’t call it a shift from television to that, but their objective also currently is to get more sales in. And therefore, the advertising with mediums, which as you rightly said, digital, which is a transaction-based medium. But we are pretty confident that the mass reach that the television platforms will provide to any advertiser, the digital mediums cannot provide it.
Mahesh Pratap Singh
And the time spent as well.
Chirag Maroo
Sir, fair enough. Sir, last thing from my side. I know you have already mentioned about the arbitration case. Just wanted to know we had this clarity in FY ’24 that all the exceptional items losses are about to end now. And as in FY ’25, we didn’t see it coming. Just wanted a clarification from your end that, are the exceptional losses which are hampering our bottom line, may be provisional or not? Is this over from now? Or is there still some exceptional items left to come?
Mahesh Pratap Singh
Chirag, I’ll let Mukund chime in, but a lot of what you saw in previous year in terms of us sort of clearing things like DSRA or potential creditor claims, is all behind us now. At this point in time, barring what you’ve seen in this quarter, which has come out of a long-pending litigation from an arbitration standpoint, there hasn’t been anything in recent times. So clearly from a standpoint of, as we’re moving business forward, it’s a fairly focused core business kind of profitability in P&L conversation. You may have — you had a situation where an old arbitration outcome came, which had an implication from an exceptional item standpoint. But we expect a lot less of that. I’ll let Mukund add anything specific. Mukund?
Mukund Galgali
I think, so even this claim and dispute has been reported in our financials earlier as well, it is only that during this quarter, it got crystallized. So this, sort of, has been called out earlier as well. And yes.
Mahesh Pratap Singh
We understand where you’re coming from, Chirag.
Mukund Galgali
I think, and just to add to Mahesh, there is a focus to sort of reduce the legal overhang, which is and to prevent any protracted litigation and unexpected outcomes. So that remains an objective.
Chirag Maroo
And you have taken the 100% provision for this arbitration case?
Mukund Galgali
That’s right. That’s right.
Chirag Maroo
Great. And last thing from my end. I’m able to see that our ad spend has shifted from INR250 crores roughly for a quarter to almost now INR300 crores. Is this the new run rate we expect?
Mahesh Pratap Singh
Yes. You’re saying our advertising expenses, right? You typically — so generally, the number has inched up from a trend line standpoint, Chirag, because we’ve been investing and then, what happens is in Q3, you also have a bit of seasonal launches and new shows and all that. So yes, the trend line or run rate has shifted, because while we are driving efficiencies and overall cost structure, we are also mindful that we don’t be short invested in business to be able to take advantage of growth. So yes, the trend line has shifted. There may be some volatility you may see as the seasonality play out. But generally, it’s going to be a higher trend line than past.
Mukund Galgali
And just to add, so it will also be dependent on the movie releases, which also has some element of publicity and advertising.
Punit Goenka
But without X movies, I think this is generally the trend line, which we expect.
Operator
The last question is from the line of Akshat from RSPN Ventures.
Akshat Bairathi
So my first question is, so can you share the status on the arbitration case filed by Star against us in the previous quarter? And my second question will be a book-keeping question. So there has been a reduction in our depreciation this quarter. So can you give us any guidance on the trajectory going forward as depreciation?
Punit Goenka
Vikas, I would request you to take the first one.
Vikas Somani
On the ICC arbitration, the proceedings have begun, both the sites have made their filings with the court and with the arbitrator, but these are — it’s still initial days. it’s a relatively long drawn process. So we’ll keep you updated as and when we progress on that.
Mukund Galgali
And I’ll take the second one on the depreciation. Akshat, this is that, it’s an organic reduction. I mean, there is no major shift in our asset profile or the depreciation rate. So it could be around the same levels.
Operator
Ladies and gentlemen, due to time constraint, we will take that as the last question. I would now like to hand the conference over to Mr. Mahesh Pratap Singh for closing comments.
Mahesh Pratap Singh
Thank you, everyone. Thank your for joining us today. We hope the conversation was helpful for you to get a better perspective on numbers and address all your questions. If you have any follow-ups or questions as you look at numbers even deeply, please feel free to reach out to us and look forward to speaking with you soon. Thanks.
Operator
On behalf of Zee Entertainment Enterprises Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.