The quarter's performance represents a remarkable operational turnaround, with net sales jumping 34.47% quarter-on-quarter to ₹240.32 crores and operating profit (excluding other income) surging to ₹78.18 crores from just ₹17.10 crores in Q2 FY26. However, this single-quarter resurgence must be viewed against a backdrop of persistent structural challenges that have plagued the company for years, including a five-year EBIT decline of 197.95% and consistent underperformance against sector peers.
Financial Performance: A Quarter of Exceptional Recovery
Zee Media's Q3 FY26 results marked a stark departure from the loss-making trajectory that has characterised recent quarters. Net sales of ₹240.32 crores represented not only a 34.47% sequential increase but also a robust 50.72% year-on-year expansion, the strongest top-line growth witnessed in recent quarters. This revenue acceleration translated into dramatically improved profitability metrics across the board.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | Operating Margin |
|---|---|---|---|---|---|
| Dec'25 | 240.32 | +34.47% | 52.77 | Profit vs Loss | 32.53% |
| Sep'25 | 178.72 | -2.00% | -15.53 | Loss | 9.57% |
| Jun'25 | 182.36 | +17.05% | -8.81 | Loss | 10.85% |
| Mar'25 | 155.80 | -2.29% | -36.76 | Loss | -5.33% |
| Dec'24 | 159.45 | +22.00% | -22.42 | Loss | 4.07% |
| Sep'24 | 130.70 | -25.72% | -49.86 | Loss | -24.05% |
| Jun'24 | 175.96 | - | -10.38 | - | 8.39% |
Operating profit before depreciation, interest, and tax (excluding other income) reached ₹78.18 crores in Q3 FY26, translating to a margin of 32.53%, the highest recorded in the available quarterly data. This represents a dramatic improvement from the 9.57% margin in Q2 FY26 and the 4.07% margin in the year-ago quarter. The PAT margin expanded to 21.96%, a complete reversal from the negative 14.06% margin in Q3 FY25.
Interest costs declined to ₹4.67 crores from ₹4.87 crores sequentially and ₹7.82 crores year-on-year, reflecting improved debt management. Depreciation charges decreased to ₹25.61 crores from ₹26.76 crores in Q2 FY26. The company reported a negative tax rate of 7.96% for the quarter, with a tax credit of ₹3.89 crores, which contributed to the bottom-line expansion.
Operational Challenges: A History of Inconsistency
Despite the impressive Q3 FY26 performance, Zee Media's operational track record reveals persistent challenges that cannot be ignored. The company's five-year sales growth stands at a modest 3.27%, whilst EBIT growth over the same period has contracted by a staggering 197.95%, indicating severe deterioration in operational efficiency and profitability generation over the medium term.
⚠️ Critical Concern: Profitability Erosion
The company's average return on capital employed (ROCE) over recent years stands at negative 5.88%, whilst the latest ROCE is even more concerning at negative 26.11%. This indicates that the company has been destroying shareholder value through its operations, with capital deployed generating negative returns.
Average EBIT to Interest coverage of negative 0.80 times highlights the company's inability to service debt obligations through operating profits, a red flag for financial sustainability.
The balance sheet presents a mixed picture. Shareholder funds stood at ₹220.71 crores as of March 2025, down from ₹289.30 crores in the previous year, reflecting accumulated losses. Long-term debt has been significantly reduced to ₹1.78 crores from ₹2.73 crores, and the debt-to-equity ratio improved to 0.55 times in the first half of FY26. However, current liabilities of ₹501.66 crores as of March 2025 remain elevated, with trade payables of ₹109.61 crores indicating working capital pressures.
Fixed assets declined to ₹334.76 crores from ₹438.00 crores year-on-year, whilst current assets increased marginally to ₹279.19 crores. The company's cash and cash equivalents stood at a concerning low of ₹6.25 crores in the first half of FY26, limiting financial flexibility. The debtors turnover ratio deteriorated to 2.92 times in H1 FY26, suggesting slower collections and potential revenue quality concerns.
The Profitability Paradox: One Quarter Doesn't Make a Trend
Zee Media's Q3 FY26 results, whilst impressive on the surface, must be contextualised within the company's broader financial trajectory. The annual financial statements paint a sobering picture: the company reported losses of ₹119.00 crores in FY25, ₹98.00 crores in FY24, and ₹63.00 crores in FY23. Operating margins (excluding other income) have been negative in recent years, standing at negative 2.9% in FY25 and negative 6.1% in FY24, compared to positive 9.0% in FY23.
Quality of Earnings: Tax Credits Boost Bottom Line
The Q3 FY26 profit benefited significantly from a tax credit of ₹3.89 crores (negative 7.96% tax rate), which artificially enhanced the bottom line. Without this tax benefit, the net profit would have been substantially lower. Investors should scrutinise whether this represents sustainable earnings quality or a one-time accounting adjustment.
The company's return on equity (ROE) averaged 6.50% in recent years, significantly below the 10-15% threshold typically expected for sustainable value creation. The latest ROE of negative 36.96% reflects the ongoing losses that have eroded shareholder value. Employee costs have remained elevated at ₹63.90 crores in Q3 FY26, representing 26.59% of net sales, suggesting limited operating leverage.
Industry Leadership: Struggling to Keep Pace with Peers
Zee Media's competitive positioning within the media and entertainment sector reveals significant underperformance relative to peers. The company's average ROE of 6.50% lags behind competitors such as T.V. Today Network (10.31%) and Sandesh (9.98%), indicating inferior capital efficiency and profitability generation.
| Company | P/E (TTM) | ROE (%) | Debt to Equity | Price to Book | Dividend Yield |
|---|---|---|---|---|---|
| Zee Media | NA (Loss Making) | 6.50% | 0.51 | 2.99 | NA |
| T.V. Today Network | 25.55 | 10.31% | -0.09 | 0.85 | 2.39% |
| Sandesh | 7.15 | 9.98% | -0.63 | 0.56 | 0.48% |
| R K Swamy | 28.50 | 7.89% | -0.30 | 2.25 | 1.37% |
| Dish TV India | NA (Loss Making) | 20.27% | 0.04 | -0.18 | NA |
Zee Media trades at a price-to-book ratio of 2.99 times, significantly higher than T.V. Today Network (0.85x) and Sandesh (0.56x), despite delivering inferior returns on equity. This valuation premium appears unjustified given the company's loss-making history and structural challenges. The company's market capitalisation of ₹630.43 crores ranks it fourth among the peer group, reflecting its micro-cap status and limited institutional appeal.
Valuation Analysis: Risky Premium Without Fundamental Support
Zee Media's valuation metrics present a concerning picture for potential investors. The company is currently loss-making on a trailing twelve-month basis, rendering the P/E ratio meaningless. The price-to-book ratio of 2.99 times implies that investors are paying nearly three times the company's book value of ₹2.07 per share, a significant premium for a business with a history of value destruction.
The EV/EBITDA multiple of 19.61 times appears elevated, particularly when considering the company's negative EBIT. The enterprise value to sales ratio of 1.02 times suggests the market is valuing the company at slightly above its annual revenue, despite persistent losses. The valuation grade has been classified as "Risky" since May 2023, having deteriorated from "Very Attractive" earlier in the year.
The stock currently trades at ₹10.08, down 38.80% from its 52-week high of ₹16.47 but up 41.77% from its 52-week low of ₹7.11. This volatility, combined with a beta of 1.34, indicates significantly higher risk compared to the broader market. The dividend yield is not applicable, as the company last paid a dividend of ₹0.15 per share in July 2016, reflecting a decade-long absence of shareholder returns.
Shareholding: Promoters Gradually Increasing Stake
The shareholding pattern reveals interesting dynamics that merit attention. Promoter holding has been steadily increasing, rising from 1.62% in March 2025 to 9.48% in December 2025, with sequential increases of 2.28%, 2.40%, and 3.18% over the past three quarters. This progressive stake building by promoters could signal confidence in the company's turnaround prospects, though the absolute promoter holding remains relatively low at below 10%.
| Quarter | Promoter % | QoQ Change | FII % | QoQ Change | Non-Institutional % |
|---|---|---|---|---|---|
| Dec'25 | 9.48% | +3.18% | 15.01% | -1.00% | 70.88% |
| Sep'25 | 6.30% | +2.40% | 16.01% | +0.04% | 73.00% |
| Jun'25 | 3.90% | +2.28% | 15.97% | +2.32% | 75.44% |
| Mar'25 | 1.62% | 0.00% | 13.65% | +1.59% | 80.51% |
| Dec'24 | 1.62% | - | 12.06% | - | 82.08% |
Foreign institutional investor (FII) holding stands at 15.01% as of December 2025, having increased from 12.06% in December 2024 but declining marginally by 1.00% in the latest quarter. The presence of 34 FIIs suggests some institutional interest, though the recent quarter-on-quarter decline raises questions about sustained conviction. Notably, mutual fund and insurance company holdings remain at zero, indicating a complete absence of domestic institutional participation.
Non-institutional shareholding dominates at 70.88%, down from 82.08% a year ago, as promoters and FIIs have gradually increased their stakes. The absence of promoter pledging is a positive, eliminating concerns about financial stress at the promoter level. However, total institutional holdings of just 19.64% reflect limited institutional confidence in the company's long-term prospects.
Stock Performance: Severe Underperformance Across Timeframes
Zee Media's stock performance has been disappointing across virtually all timeframes, with significant underperformance relative to the Sensex benchmark. Over the past year, the stock has declined 28.61% compared to the Sensex's gain of 8.74%, resulting in negative alpha of 37.35 percentage points. The two-year return of negative 33.38% versus the Sensex's positive 15.71% further underscores the value destruction.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +23.38% | -0.94% | +24.32% |
| 1 Month | +16.80% | -1.00% | +17.80% |
| 3 Months | +4.89% | -1.99% | +6.88% |
| 6 Months | -21.98% | +2.80% | -24.78% |
| YTD | +13.26% | -2.85% | +16.11% |
| 1 Year | -28.61% | +8.74% | -37.35% |
| 2 Years | -33.38% | +15.71% | -49.09% |
| 3 Years | -13.55% | +37.01% | -50.56% |
The three-year and four-year returns paint an even grimmer picture, with the stock declining 13.55% and 48.41% respectively, whilst the Sensex surged 37.01% and 42.37%. The ten-year return of negative 42.23% compared to the Sensex's remarkable 260.20% gain represents a catastrophic underperformance of over 300 percentage points, highlighting the severe long-term value destruction.
Recent momentum has been more positive, with the stock gaining 23.38% over the past week and 16.80% over the past month, likely driven by the Q3 FY26 results. However, this short-term rally should be viewed cautiously given the stock's high volatility (51.24%) and negative risk-adjusted return of negative 0.56 over the past year. The stock also underperformed its sector by 13.51 percentage points over the past year, with the media and entertainment sector declining 15.10%.
Investment Thesis: Mixed Signals with Structural Headwinds
The investment thesis for Zee Media presents a complex picture with conflicting signals across key parameters. The company's Mojo Score stands at 34 out of 100, firmly in the "SELL" category (30-50 range), reflecting fundamental concerns that outweigh the recent quarterly improvement. The score has remained in the "Strong Sell" or "Sell" range since April 2025, with the current rating having changed from "Strong Sell" on May 6, 2025.
The quality assessment reveals a "Below Average" rating, reflecting weak long-term financial performance with a negative 197.95% CAGR in operating profits over five years. The average EBIT to interest coverage of negative 0.80 times and average ROCE of negative 5.88% highlight fundamental profitability challenges. However, the absence of promoter pledging and moderate institutional holdings of 19.64% provide some comfort.
The financial trend for Q3 FY26 is classified as "Outstanding," driven by record-high net sales, operating profit, and PAT for the quarter. Key positives include the operating profit to interest ratio reaching 16.74 times and the debt-equity ratio declining to 0.55 times. However, concerns remain around cash and cash equivalents hitting a low of ₹6.25 crores and the debtors turnover ratio declining to 2.92 times.
Key Strengths & Risk Factors
✓ Key Strengths
- Q3 FY26 Turnaround: Strong return to profitability with net profit of ₹52.77 crores and 32.53% operating margin
- Revenue Momentum: Net sales growth of 50.72% YoY and 34.47% QoQ in Q3 FY26
- Debt Reduction: Long-term debt reduced to ₹1.78 crores; debt-equity ratio improved to 0.55 times
- No Promoter Pledging: Zero pledged shares eliminates financial stress concerns
- Promoter Confidence: Promoter stake increased from 1.62% to 9.48% over recent quarters
- Interest Coverage: Operating profit to interest ratio improved to 16.74 times in Q3 FY26
- Recent Price Momentum: Stock up 23.38% in past week and 16.80% in past month
✗ Key Concerns
- Chronic Losses: Annual losses of ₹119 crores (FY25), ₹98 crores (FY24), ₹63 crores (FY23)
- EBIT Collapse: Five-year EBIT growth of negative 197.95% indicates severe operational deterioration
- Negative ROCE: Average ROCE of negative 5.88%, latest at negative 26.11%
- Weak ROE: Average ROE of 6.50%, significantly below sector peers
- Long-term Underperformance: Stock down 28.61% (1Y), 33.38% (2Y), 42.23% (10Y)
- Cash Crunch: Cash and cash equivalents at low ₹6.25 crores in H1 FY26
- Zero Institutional Support: No mutual fund or insurance company holdings
- High Volatility: Stock volatility of 51.24% with beta of 1.34
- Risky Valuation: P/BV of 2.99x despite loss-making history
Outlook: What to Watch in Coming Quarters
Positive Catalysts
- Sustained Profitability: Ability to maintain positive PAT margins for consecutive quarters
- Revenue Consistency: Maintaining quarterly sales above ₹200 crores
- Margin Stability: Operating margins consistently above 20%
- Working Capital Improvement: Debtors turnover ratio improving above 4 times
- Institutional Interest: Mutual fund or insurance company participation
Red Flags to Monitor
- Return to Losses: Any quarter showing negative PAT would signal false dawn
- Revenue Volatility: Sharp QoQ declines in net sales
- Margin Compression: Operating margins falling below 15%
- Cash Deterioration: Further decline in cash balances below ₹5 crores
- FII Exit: Significant reduction in foreign institutional holdings
The technical trend remains "Mildly Bearish," having changed from "Bearish" on February 9, 2026. The stock trades below all key moving averages including the 200-day MA of ₹11.64, indicating persistent technical weakness despite recent gains. Immediate resistance lies at ₹8.27 (20-day MA area), with major resistance at ₹9.58 (100-day MA) and strong resistance at ₹11.64 (200-day MA). Support exists at the 52-week low of ₹7.11.
The Verdict: Tactical Bounce, Not Strategic Turnaround
Score: 34/100
For Fresh Investors: Avoid initiating positions. Zee Media's Q3 FY26 results, whilst impressive, represent a single-quarter recovery that lacks the track record to inspire confidence. The company's chronic loss-making history, negative ROCE, weak ROE, and consistent underperformance against both peers and benchmarks suggest deep-seated structural issues. The risky valuation at 2.99x book value for a loss-making company offers no margin of safety.
For Existing Holders: Consider using the recent price strength (up 23.38% in one week) as an opportunity to reduce exposure or exit positions. Whilst promoter stake building and the Q3 turnaround provide some hope, the absence of institutional support, high volatility (51.24%), and decade-long value destruction warrant a cautious approach. Wait for at least 2-3 consecutive quarters of sustained profitability before reconsidering.
Fair Value Estimate: ₹7.50-8.00 (25-30% downside from current levels of ₹10.08). This estimate factors in the company's below-average quality rating, negative average ROCE, and elevated P/BV multiple relative to fundamentals.
Rationale: One quarter does not make a trend. Zee Media's impressive Q3 FY26 performance is overshadowed by years of operational challenges, consistent losses, and severe underperformance. The company's below-average quality grade, risky valuation, weak long-term fundamentals (negative 197.95% EBIT CAGR), and absence of domestic institutional participation suggest significant execution risks ahead. Until the company demonstrates sustained profitability across multiple quarters, rebuilds institutional confidence, and addresses its structural challenges, the risk-reward profile remains unfavourable.
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. Past performance is not indicative of future results. Investments in equity markets are subject to market risks, and investors may lose their entire capital.
