The Times Group subsidiary's second-quarter performance reveals a company caught between promising revenue expansion and persistent bottom-line pressures. Whilst net sales climbed to ₹141.14 crores in Q2 FY26 from ₹113.54 crores in Q2 FY25, marking an impressive 24.31% year-on-year increase, the company remained unprofitable with a net loss of ₹4.10 crores. This represents a marginal deterioration of 1.68% compared to the ₹4.17 crore loss posted in the same quarter last year.
On a sequential basis, the quarter-on-quarter revenue growth of 20.68% from Q1 FY26's ₹116.95 crores demonstrates accelerating momentum, likely driven by festive season advertising spend and improved radio listenership. However, the loss widened by 23.93% sequentially from ₹5.39 crores in Q1 FY26, indicating that operational leverage remains elusive despite scale benefits.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | YoY Growth | Net Profit (₹ Cr) | Operating Margin |
|---|---|---|---|---|---|
| Sep'25 | 141.14 | +20.68% | +24.31% | -4.10 | 8.26% |
| Jun'25 | 116.95 | -26.08% | +3.04% | -5.39 | 6.58% |
| Mar'25 | 158.21 | -0.43% | +5.01% | 12.06 | 18.79% |
| Dec'24 | 158.90 | +39.95% | — | 9.14 | 19.39% |
| Sep'24 | 113.54 | +0.04% | — | -4.17 | 9.90% |
| Jun'24 | 113.50 | -24.66% | — | -5.50 | 6.62% |
| Mar'24 | 150.66 | — | — | 8.69 | 18.45% |
Financial Performance: Revenue Momentum Masks Margin Erosion
Entertainment Network's Q2 FY26 financial performance presents a paradox: strong top-line growth accompanied by deteriorating profitability metrics. Net sales of ₹141.14 crores represented the second-highest quarterly revenue in recent periods, trailing only the March quarters when advertising budgets traditionally peak. The 24.31% year-on-year growth significantly outpaced the company's five-year sales CAGR of 8.25%, suggesting a potential inflection point in revenue trajectory.
However, operating margins tell a different story. The operating profit margin (excluding other income) contracted to 8.26% in Q2 FY26 from 9.90% in Q2 FY25, despite the revenue expansion. Operating profit before depreciation, interest, and tax (excluding other income) stood at ₹11.38 crores, up marginally from ₹11.13 crores year-on-year, but the growth rate of 2.25% lagged far behind the 24.31% revenue growth, indicating significant operating deleverage.
Employee costs remained elevated at ₹37.39 crores, representing 26.49% of net sales. Whilst this was fractionally lower than the ₹37.32 crores in Q2 FY25, the ratio to sales improved only marginally from 32.87% to 26.49%, suggesting limited efficiency gains. The company's inability to significantly reduce employee costs as a percentage of revenue despite scale benefits raises questions about operational flexibility and cost structure optimisation.
The profit before tax of negative ₹6.19 crores in Q2 FY26 compares unfavourably with the negative ₹1.82 crores in Q2 FY25, representing a 240.11% deterioration. This was primarily driven by the burden of depreciation charges totalling ₹20.73 crores, which consumed nearly 14.69% of net sales. Interest costs remained relatively stable at ₹3.59 crores, reflecting the company's zero long-term debt position and net cash status.
Other income provided some cushion at ₹6.75 crores, though this declined 36.02% year-on-year from ₹10.55 crores in Q2 FY25. The reduction in other income, likely from treasury operations and investments, contributed to the widening loss at the bottom line. The effective tax rate of 33.93% on losses resulted in a tax credit of ₹2.10 crores, partially offsetting the pre-tax loss.
Operational Challenges: The Depreciation Burden and Margin Compression
The most significant impediment to Entertainment Network's profitability remains the disproportionately high depreciation charge relative to its revenue base. At ₹20.73 crores in Q2 FY26, depreciation alone exceeded the company's operating profit (excluding other income) by 82.18%, creating a structural profitability challenge. This depreciation burden stems from the capital-intensive nature of radio broadcasting infrastructure, including transmission equipment, studio facilities, and technology platforms.
The company's return on equity (ROE) of 1.22% on an average basis and 1.49% for the latest period underscores the weak capital efficiency. For context, an ROE below 5% is generally considered poor, indicating that the company generates minimal returns for its shareholders relative to the equity capital employed. This anaemic ROE reflects both the profitability challenges and the substantial shareholder funds of ₹776.30 crores that remain underutilised.
Return on capital employed (ROCE) presents an even grimmer picture at negative 0.75% for the latest period and negative 3.05% on average. A negative ROCE indicates that the company is destroying value rather than creating it, as the operating returns fail to cover even the cost of capital employed. The company's five-year EBIT growth of 13.99% provides some optimism, but the absolute EBIT levels remain insufficient to generate positive economic returns.
Critical Concern: Persistent Loss-Making Operations
Entertainment Network has posted losses in five out of the last seven quarters, with only the seasonally strong March and December quarters delivering profits. The H1 FY26 cumulative loss of ₹9.49 crores compares unfavourably with the ₹9.67 crore loss in H1 FY25, showing minimal improvement despite revenue growth. The company's inability to convert top-line momentum into bottom-line profitability raises serious questions about the business model's sustainability and management's execution capabilities.
The balance sheet reveals a debt-free company with zero long-term borrowings and a net debt-to-equity ratio of negative 0.17, indicating a net cash position. Shareholder funds stood at ₹776.30 crores as of March 2025, with reserves and surplus of ₹728.63 crores. However, fixed assets of ₹315.62 crores and current assets of ₹530.27 crores suggest that much of the capital is tied up in working capital and legacy infrastructure rather than being deployed in high-return growth initiatives.
Industry Context: Radio Broadcasting's Structural Headwinds
The radio broadcasting industry in India faces structural challenges from digital disruption, changing consumer preferences, and fragmented advertising spend. Whilst traditional radio maintains relevance in tier-2 and tier-3 cities and among commuters, the proliferation of digital audio platforms, podcasts, and streaming services has eroded radio's share of the audio entertainment market. Entertainment Network's performance must be viewed against this backdrop of industry-wide pressure.
Advertising revenue, which forms the backbone of radio broadcasting economics, has increasingly shifted towards digital platforms offering superior targeting, measurement, and engagement metrics. The 24.31% revenue growth in Q2 FY26 suggests Entertainment Network may be gaining market share or benefiting from a cyclical upturn in advertising spend, but the sustainability of this growth remains questionable given the secular headwinds facing traditional media.
The company's operating margin compression despite revenue growth indicates intense competitive pressure and limited pricing power. Radio stations compete not only with each other but also with television, digital platforms, outdoor advertising, and other media channels for a finite advertising budget. The inability to improve margins during a period of strong revenue growth suggests that Entertainment Network may be winning business through aggressive pricing or promotional offers rather than through superior value proposition.
Market Position: Dominant Brand, Challenged Economics
Radio Mirchi, Entertainment Network's flagship brand, remains one of India's most recognised radio networks with presence across multiple cities. The Times Group parentage provides brand credibility and cross-promotional opportunities. However, brand strength alone has proven insufficient to overcome the fundamental economics of radio broadcasting in an increasingly digital media landscape. The company's challenge lies in leveraging its brand equity and listener base to create new revenue streams beyond traditional spot advertising.
Peer Comparison: Underperformance Across Key Metrics
Entertainment Network's financial metrics compare unfavourably with peers in the media and entertainment sector. The company's ROE of 1.22% significantly lags the sector average, with peers like R K Swamy and T.V. Today Network delivering ROEs of 11.97% and 11.24% respectively. This performance gap highlights Entertainment Network's inferior capital efficiency and profitability challenges relative to industry counterparts.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt to Equity | Div Yield (%) |
|---|---|---|---|---|---|
| Ent.Network | 54.75 | 0.83 | 1.22 | -0.17 | 1.49 |
| T.V. Today Netw. | 27.24 | 0.98 | 11.24 | -0.29 | 2.05 |
| Dish TV India | NA (Loss Making) | -0.25 | 0.00 | 0.05 | — |
| OnMobile Global | 57.89 | 1.27 | 3.04 | 0.01 | — |
| R K Swamy | 33.92 | 2.63 | 11.97 | -0.51 | 1.15 |
| H T Media | 32.24 | 0.38 | 0.26 | -0.29 | — |
The price-to-earnings ratio of 54.75x appears elevated compared to peers like T.V. Today Network (27.24x) and R K Swamy (33.92x), suggesting that Entertainment Network trades at a premium despite inferior profitability. This valuation anomaly likely reflects the market's hope for a turnaround rather than current fundamentals. The price-to-book ratio of 0.83x, whilst below the peer average, offers limited comfort given the weak ROE profile.
Entertainment Network's dividend yield of 1.49% trails T.V. Today Network's 2.05% despite the company paying out 82.66% of profits as dividends. This exceptionally high payout ratio on minimal earnings raises sustainability concerns. The company paid a dividend of ₹2.00 per share with an ex-dividend date of September 4, 2025, depleting cash reserves without retaining capital for growth investments or operational improvements.
Valuation Analysis: Expensive Relative to Fundamentals
Entertainment Network's current valuation appears disconnected from its underlying fundamentals. At a market capitalisation of ₹632.11 crores and a stock price of ₹132.60, the company trades at 54.75 times trailing twelve-month earnings, a premium that seems unjustified given the persistent losses in recent quarters and weak return ratios. The valuation grade of "Risky" assigned by proprietary analysis reflects these concerns.
The enterprise value to EBITDA multiple of 6.49x appears reasonable on the surface, but this metric loses relevance when EBITDA fails to translate into positive earnings after accounting for depreciation and interest. The negative EV/EBIT ratio of -93.78x highlights the company's inability to generate positive operating earnings, making traditional valuation multiples difficult to interpret meaningfully.
Historical valuation trends show the stock has oscillated between "Fair," "Expensive," and "Risky" grades over the past year, with the most recent classification as "Risky" since February 2025. The stock's 52-week range of ₹120.10 to ₹199.80 indicates significant volatility, with the current price 33.63% below the 52-week high and just 10.41% above the 52-week low, suggesting limited downside protection at current levels.
The book value per share of ₹162.85 exceeds the current market price of ₹132.60, resulting in a P/BV ratio of 0.83x. Whilst this below-book valuation might appear attractive, it must be contextualised against the company's inability to generate adequate returns on that book value. A low P/BV ratio combined with low ROE typically signals a value trap rather than a value opportunity, as the market correctly discounts assets that fail to generate economic returns.
Shareholding Pattern: Stable Promoter Base, Marginal Institutional Interest
Entertainment Network's shareholding structure reveals a stable promoter base with Bennett Coleman And Company Limited, the Times Group flagship, holding 71.15% stake consistently across the past five quarters. This unwavering promoter commitment provides governance stability and strategic continuity, though it also limits free float and potentially constrains stock liquidity.
| Shareholder Category | Sep'25 | Jun'25 | Mar'25 | Dec'24 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 71.15% | 71.15% | 71.15% | 71.15% | 0.00% |
| FII | 6.21% | 6.15% | 6.12% | 6.12% | +0.06% |
| Mutual Fund | 3.34% | 3.34% | 3.34% | 3.34% | 0.00% |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Other DII | 1.03% | 0.72% | 0.72% | 0.72% | +0.31% |
| Non-Institutional | 18.27% | 18.64% | 18.67% | 18.67% | -0.37% |
Foreign institutional investor (FII) holdings increased marginally to 6.21% in September 2025 from 6.15% in June 2025, representing a modest 0.06 percentage point sequential increase. This uptick, whilst small, suggests some international investor interest, though the absolute FII holding of just 6.21% indicates limited conviction from global institutional capital. The presence of 19 FII holders suggests fragmented foreign ownership rather than concentrated institutional backing.
Mutual fund holdings remained static at 3.34% across all quarters, with just one mutual fund scheme holding the stock. This minimal mutual fund participation reflects the investment community's cautious stance on Entertainment Network's prospects. The absence of insurance company holdings further underscores the stock's limited appeal to conservative institutional investors who typically favour stable, profitable businesses.
The marginal decline in non-institutional holdings from 18.64% to 18.27% quarter-on-quarter suggests some retail investor profit-booking or loss of confidence. The increase in other DII holdings from 0.72% to 1.03% provides a minor positive signal, but the absolute level remains negligible. Overall, the shareholding pattern reveals a promoter-dominated structure with tepid institutional interest, limiting potential catalysts for re-rating.
Stock Performance: Severe Underperformance Across All Timeframes
Entertainment Network's stock performance has been dismal across virtually all time horizons, significantly underperforming both the Sensex and its media and entertainment sector peers. The stock declined 2.00% on November 6, 2025, closing at ₹132.60, and has delivered negative returns across one week (-2.18%), one month (-13.19%), three months (-13.22%), and year-to-date (-25.69%) periods.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -2.18% | -0.92% | -1.26% |
| 1 Month | -13.19% | +2.24% | -15.43% |
| 3 Months | -13.22% | +3.83% | -17.05% |
| 6 Months | +2.00% | +3.70% | -1.70% |
| YTD | -25.69% | +7.02% | -32.71% |
| 1 Year | -32.62% | +4.04% | -36.66% |
| 3 Years | -16.21% | +37.20% | -53.41% |
| 5 Years | -10.74% | +99.62% | -110.36% |
The one-year return of negative 32.62% compares abysmally with the Sensex's positive 4.04% return, resulting in a negative alpha of 36.66 percentage points. This massive underperformance reflects the market's loss of confidence in Entertainment Network's ability to execute a turnaround. The stock's three-year and five-year returns of negative 16.21% and negative 10.74% respectively, against Sensex gains of 37.20% and 99.62%, underscore the value destruction experienced by long-term shareholders.
Technical indicators paint a uniformly bearish picture. The stock trades below all key moving averages, including the 5-day (₹134.48), 20-day (₹141.89), 50-day (₹153.31), 100-day (₹151.72), and 200-day (₹147.60) moving averages. This alignment of the stock below all moving averages signals strong bearish momentum and lack of technical support. The current trend classification of "Mildly Bearish" since October 20, 2025, reflects deteriorating technical health.
The stock's beta of 1.50 indicates high volatility relative to the market, with 38.50% annualised volatility compared to the Sensex's 12.45%. This high-beta, high-volatility profile combined with negative returns creates a "high risk, low return" classification, making the stock unattractive from a risk-adjusted return perspective. The negative Sharpe ratio confirms that investors are not being compensated for the elevated risk undertaken.
"Entertainment Network exemplifies the value trap phenomenon: a stock trading below book value with stable promoter holding, yet destroying shareholder value through persistent operational losses and inability to generate adequate returns on capital."
Investment Thesis: Multiple Red Flags Outweigh Limited Positives
The investment thesis for Entertainment Network faces significant headwinds across multiple dimensions. The proprietary Mojo score of 31 out of 100 places the stock firmly in "SELL" territory, reflecting the confluence of weak fundamentals, poor technical momentum, stretched valuation, and deteriorating financial trends. The quality grade of "Average" provides little comfort when combined with "Risky" valuation and "Flat" financial trend assessments.
The company's operational challenges appear structural rather than cyclical. Whilst the 24.31% revenue growth in Q2 FY26 provides a glimmer of hope, the inability to convert this top-line momentum into bottom-line profitability suggests fundamental issues with the business model. The radio broadcasting industry's secular headwinds from digital disruption compound these company-specific execution challenges.
From a technical perspective, the "Mildly Bearish" trend classification, alignment below all moving averages, and negative momentum indicators across MACD, KST, and Bollinger Bands suggest further downside risk. The stock's 33.63% decline from its 52-week high of ₹199.80 to the current ₹132.60 reflects ongoing selling pressure, with limited technical support visible until the 52-week low of ₹120.10.
KEY STRENGTHS
- Strong revenue growth of 24.31% YoY in Q2 FY26, indicating market share gains or cyclical recovery
- Debt-free balance sheet with net cash position (Debt to Equity: -0.17), providing financial flexibility
- Stable promoter holding at 71.15% with no pledging, ensuring governance continuity
- Established Radio Mirchi brand with pan-India presence and Times Group backing
- Consistent dividend payer with 1.49% yield, demonstrating commitment to shareholder returns
- Trading below book value (P/BV: 0.83x), offering potential margin of safety
- Five-year EBIT CAGR of 13.99% shows historical growth capability
KEY CONCERNS
- Persistent losses with Q2 FY26 net loss of ₹4.10 crores despite revenue growth
- Anaemic ROE of 1.22% and negative ROCE of 0.75%, indicating value destruction
- Elevated P/E of 54.75x unjustified by fundamentals, suggesting overvaluation
- Operating margin compression to 8.26% from 9.90% YoY despite scale benefits
- Disproportionately high depreciation (₹20.73 crores) exceeding operating profit
- Unsustainable dividend payout ratio of 82.66% on minimal earnings
- Severe stock underperformance with -32.62% one-year return vs Sensex +4.04%
- Minimal institutional interest (FII: 6.21%, MF: 3.34%, Insurance: 0%)
- High beta of 1.50 and volatility of 38.50% creating unfavourable risk-return profile
- Structural industry headwinds from digital disruption and changing media consumption
Outlook: What to Monitor Going Forward
Entertainment Network's path forward hinges on its ability to execute a credible turnaround strategy addressing both top-line sustainability and bottom-line profitability. The company needs to demonstrate that Q2 FY26's revenue growth represents the beginning of a sustainable trend rather than a temporary spike driven by festive season advertising or one-off factors.
POSITIVE CATALYSTS
- Sustained revenue growth above 15% for multiple quarters demonstrating market share gains
- Operating margin expansion to double digits (above 10%) through cost optimisation
- Return to consistent quarterly profitability with positive PAT for three consecutive quarters
- Successful diversification into digital audio or adjacent revenue streams
- Increased institutional participation with FII/MF holdings rising above 15%
RED FLAGS TO WATCH
- Continued quarterly losses beyond Q3 FY26, indicating structural profitability issues
- Operating margin compression below 7%, suggesting pricing pressure or cost inflation
- Revenue growth deceleration below 10% YoY, signalling loss of momentum
- Further decline in institutional holdings or promoter stake sale
- Stock breaking below ₹120 (52-week low), triggering technical breakdown
- Reduction or elimination of dividend, signalling cash flow stress
Investors should closely monitor the company's Q3 FY26 results, expected in early 2026, for confirmation of revenue sustainability and any signs of margin improvement. The traditionally strong March quarter will be crucial in determining whether Entertainment Network can deliver full-year profitability for FY26. Management commentary on strategic initiatives, digital transformation efforts, and cost rationalisation plans will provide insights into the company's ability to adapt to industry changes.
From a technical standpoint, the stock needs to reclaim the 20-day moving average at ₹141.89 and subsequently the 50-day moving average at ₹153.31 to signal any potential trend reversal. Until then, the path of least resistance remains downward, with the 52-week low of ₹120.10 acting as the next major support level. A break below this level could trigger accelerated selling and test the psychological ₹100 mark.
The Verdict: Avoid This Value Trap
Score: 31/100
For Fresh Investors: Avoid initiating positions in Entertainment Network at current levels. The combination of persistent operational losses, weak return ratios, stretched valuation, and bearish technical momentum creates an unfavourable risk-reward proposition. Wait for concrete evidence of sustained profitability improvement and margin expansion before considering entry.
For Existing Holders: Consider reducing positions or exiting on any technical bounce towards the ₹140-145 range (20-day moving average area). The stock's inability to convert revenue growth into profits, combined with severe underperformance and deteriorating technical health, suggests limited upside potential in the near to medium term. Long-term holders should reassess their investment thesis in light of persistent value destruction.
Fair Value Estimate: ₹110-120 (17% downside risk from current levels), based on 0.70x P/BV multiple applied to book value of ₹162.85, reflecting the company's sub-par ROE profile and operational challenges.
Note- ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
