Star India Reports Rs 12,548 Crore Loss in FY24 Due to Provision for Onerous ICC Contract

Star India, a subsidiary of Walt Disney, declared a standalone net loss of Rs 12,548 crore for the fiscal year ending March 31. The broadcaster disclosed in a statement to the stock exchanges that this dismal financial outcome stems from a provision of Rs 12,319 crore made for an ‘onerous contract’ linked to the International Cricket Council (ICC) media rights.  

"The company has estimated the contract with ICC to be onerous as the expected revenue from customers relating to this right as and when the related event is broadcasted/streamed is likely to be less than the cost involved in broadcasting and streaming these events and hence has estimated a loss from future events relating to these media rights to be Rs 12,319.31 crore as of 31 March 2024," Star India said. It added that the judgments and estimates may vary in future due to the uncertainty involved with them.

This is considered an impairment under global accounting standards and will be recognized over the next few years.

Star secured the ICC TV and digital rights for a massive $3 billion over a four-year period ending in 2027. Later, the company sublicensed the TV rights to Zee Entertainment, which ultimately chose not to move forward with the agreement after the collapse of its merger deal with Sony Group Corp's India units in January.

Health, along with financial capabilities, proved challenging for Zee which also couldn’t afford to invest significantly in a very expensive cricket property, the ICC rights. 

Thereafter, in a dramatic u-turn by Zee, Star instituted arbitration against Punit Goenka’s company in London Court of International Arbitration (LCIA) for $940 million damages. 

In a regulatory filing submitted in September, Zee refuted Star's claims, stating that the arbitration process was still at an early stage and the LCIA had not yet tendered any findings on the company’s liability. 

Star India, which is embroiled in a merger with Reliance Industries’ Viacom18, declared a standalone net profit of Rs 1,465 crore for FY23. 

This was also the case with operating revenue, which dropped by more than 6% and was reported at Rs 18,587 crore in FY24, compared to the previous year’s figure of Rs 19,812 crore, yet expenses increased by more than 68% escalating to Rs 31,548 crore from the previous year’s Rs 18,724 crore mainly due to contracts related provisions.

The advertising revenue of the organization dipped by four percent at Rs 10736 crore while the subscription revenue also dropped by over one percent at Rs 6909 crore. Star India refused to speak regarding its financial performance within the period. Meanwhile, on 30 September 2024, Star lodged a petition at the National Company Law Tribunal (NCLT) in Mumbai for the combination of Star Television Productions Ltd (STPL), a company incorporated in the British Virgin Islands with the business in question. The merger plan which is yet to be approved by the NCLT was agreed upon by the boards of both Companies on 24th September. After the NCLT approval is obtained the company now has to fulfill the requirements specified in the scheme of the amalgamation for the scheme to become effective. In May the NCLT’s Mumbai bench sanctioned the merger of Novi Digital Entertainment responsible for the Disney+ Hotstar streaming service with Star India. With all key regulatory clearances from the Competition Commission of India, NCLT, Ministry of Information and Broadcasting secured, the merger of Star with Viacom18 is at its tail end and the leadership team has also been mostly constituted.

At the present time, Star India has expanded its reach to cover the ownership and the operation of a total of 77 television channels dealing with the entertainment, sports, and children segments in addition to the streaming service of Disney+. Hotstar which was formerly owned by Novi Digital Entertainment has completed its transition to Star as well.

Viacom18 is also said to have incurred a net loss of Rs 252 crores in FY24 as opposed to a net gain of Rs 11 crores in the previous financial year. This loss was explained by high sports and streaming expenditures even though revenue grew by 75%, reaching Rs 8,032 crores.

Star India was given a valuation of Rs 26,000 crores under the merger agreement while Viacom 18 fetched a valuation of Rs 33,000 crores. As part of the merger, Reliance is expected to fund Rs 11,500 crores in Star India, which will integrate the television and digital assets of Stars and Viacom 18.

Post-merger, Star India will have a 56% shareholding for Reliance, 37% for Disney, and Bodhi Tree Systems, owned by Uday Shankar and James Murdoch, will hold 7%. Whereas Nita Ambani will be the chair of the new entity, the role of vice chair will be bestowed to Uday Shankar.