Zee Telefilms bounced back from an early low of Rs 73 following reports that OCB, Delgrada, has pledged another 7.6% equity of the company to brokerage CSFB.
The Mauritius based overseas corporate body, Delgrada, is also promoted by Zee Telefims' founders. The news of the share pledge deal pushed the scrip of the television broadcaster upwards, making it the biggest gainer in the 30-share BSE Sensex in morning trades on Friday.
By 10:10 IST, Zee Telefilms had spurted 3.11% to Rs 76.25. Over 2.5 lakh Zee Telefilms shares were traded on BSE by then. In two sessions (17 March and 20 March 2003), the scrip of Zee Telefilms rose 7.56% to Rs 73.95 from Rs 68.75. It was not so fortunate in the earlier sessions between 28 February and 17 March 2003, when it lost 21.9% from Rs 88. The fall precipitated on broad war concerns and worries over the company's performance in the current quarter ending 31 March 2003.
The Mauritius-based Delgrada has pledged an additional 3.1 crore shares or 7.6% of the equity capital of Zee Telefilms held by it in favour of Credit Suisse First Boston, Singapore. As per reports the company has already pledged 4.5% in the past, thus implying that the company has pledged a total of 12.1% stake out of the 28.5% it holds in Zee Telefilms with CSFB.
But CSFB, despite the share pledge deal, does not garner any voting rights for itself in Zee Telefilms.
Zee Telefilms had received a formal clearance for the proposed transaction from the Reserve Bank of India subject to a mandatory approval from the Foreign Investment Promotion Board in the event of invocation of the pledge by CSFB because the issue involves change in foreign ownership of equity shares.
Earlier, the Subhash Chandra group had finalised plans to pledge equity shares of Zee Telefilms with CSFB for a three-year term loan of $40 million.
The deal (that was contracted earlier) between Delgrada and CSFB had stipulated that in case Delgrada was unable to repay the loan within the stipulated period of three years, CSFB would have the right to invoke the pledge and acquire ownership of the equity shares paving the way for a substantial stake in Zee Telefilms.
Analysts expect Zee Telefilms to turn out a dismal performance in the current quarter ending 31 March 2003 due to pressure on advertising revenues as a result of the World Cup Cricket telecast. Rival channels are broadcasting the World Cup matches and the shift in viewership is proving expensive for Zee.
In fact, the company had earlier said "...looking ahead, there is further low visibility in the advertising revenue scenario because of the Cricket World Cup. There could be an impact on the business of Zee because of a shift in advertising revenues to cricket, particularly during the cricket matches. "
Sony Entertainment Television (which is telecasting the World Cup) has hiked advertising rates seven times for the super sixes series, semi-final and final matches. The advertising rates for a spot has jumped from $7,000 to $50,000. This hike should put further pressure on the company's revenues as money has been further squeezed what with India making it to the finals of the World Cup. The Cricket World Cup, which commenced on 10 February 2003, will end on 23 March 2003.
For the third quarter ended 31 December 2002, the media company's consolidated net profit jumped 36% to Rs 70.88 crore compared to Rs 52.11 crore in the corresponding period of the previous year. Total income increased by 9.89% to Rs 325.02 crore (Rs 3.25 billion) from Rs 295.76 crore (Rs 2.95 billion) in DQ 2001. On a stand-alone basis, for the quarter ended 31 December 2002, Zee Telefilms recorded a net profit of Rs 22.19 crore on total income of Rs 141.13 crore (Rs 1.41 billion).
BSE code: 505537
