TV ad cap scrapped, but 1-3% revenue gain may be all broadcasters get

The government’s decision to remove the 12 minute per hour cap on television advertising may give broadcasters more room to sell inventory, but the move is unlikely to materially change the sector’s growth trajectory.

Karan Taurani, executive vice president at Elara Capital estimates the policy change could increase industry advertising revenue by only 1% to 3%, as the bigger problem for television is declining audience engagement and weakening advertiser demand rather than a shortage of advertising inventory.

“Fundamentally, television’s key challenges relate to declining viewership and content engagement, rather than a shortage of ad inventory,” Taurani said. The impact of the regulatory change is also likely to be uneven, with regional general entertainment channels and free to air channels, which together account for around 25% to 30% of TV AdEx, emerging as the biggest beneficiaries.

The limited financial upside becomes clearer against the backdrop of a shrinking television advertising market. TV AdEx declined at a roughly 4% CAGR from ₹313 billion in CY21 to ₹263 billion in CY25.

Zee Entertainment’s advertising revenue fell at around 6% CAGR between FY20 and FY26 and remains 31% below FY20 levels, while Sun TV Network’s advertising revenue declined at around 3% CAGR and is still 15% below FY20.

More inventory does not guarantee more advertising revenue

A large part of television is already operating at or above the old limit. News channels, which account for around 7% to 8% of TV AdEx, typically carry 16 to 18 minutes of advertising per hour, while parts of regional television have also operated above 12 minutes. Live sports, accounting for roughly 22% to 24% of TV AdEx, has limited scope to add advertising without disrupting events.

The larger opportunity lies in Hindi GEC, which accounts for around 26% of TV AdEx and has operated closer to the regulatory cap. But here too, Taurani sees advertiser demand as the constraint, amid fragmented audiences and limited content innovation. If around 25% of TV AdEx benefits from the change and generates 5% to 10% net incremental advertising revenue after pricing dilution, the overall industry uplift would still be only around 1% to 3%.

Pricing could become an additional pressure point. FCT volumes remained stable until CY24 before falling around 10% in CY25. Hindi GEC and sports account for around half of TV AdEx despite contributing only around 8% of volume, but yields are coming under pressure as cricket moves increasingly towards free streaming and GEC audiences fragment. At the same time, advertisers have greater bargaining power as budgets shift towards digital platforms that offer stronger targeting, attribution and measurement.

The audience shift is equally significant. India’s overall television universe stands at around 193 million households, compared with 175 million in CY20, but pay TV households declined at roughly 4% CAGR to around 104 million in CY25, including a loss of 11 million households during the year. Weekly active connected TV households, meanwhile, rose to more than 40 million from around 30 million in 2024. FMCG still accounts for around 46% of TV AdEx, although its share of television spending has fallen by 426 basis points over five years.

Among broadcasters, Sun TV appears better placed than Zee to monetise the change. More than 90% of Sun TV’s television exposure is in regional GEC, where viewership and advertiser demand have remained relatively resilient. Zee, by comparison, has around 40% of its advertising mix in Hindi GEC, where inventory headroom is greater but incremental advertiser demand is weaker.

The brokerage expects the removal of the cap to lift FY28E advertising revenue by around 4.5% for Sun TV and 2% for Zee. The impact on company revenue is estimated at 1.3% and 0.7%, respectively, while PAT could rise 2.2% for Sun TV and 3.3% for Zee. The corresponding target price uplift is only around 1% for Sun TV and 3.2% for Zee, suggesting the policy is earnings accretive but not enough to trigger a structural rerating.