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Interval for media companies

May 8, 2000

There have been reports that a host of media companies that were slated to approach the capital market have postponed their Initial Public Offerings (IPOs). These include NDTV, Sagar Entertainment, Nimbus Communications, UTV, Pritish Nandy Communications and Magnasound. There are others who are keeping a low profile such as Sony Entertainment, Sun TV, Eenadu TV, the Hinduja–owned ATN and Creative Eye. Initially, the hesitation was on account of the SEBI requirement that 25% of the equity has to be diluted in favour of the investors. This requirement was subsequently amended and thse companies were required to dilute only 10% of the equity. Now the hesitation stems from the expectation of a poor reception to the high premium issues after witnessing the listing of recent high flyers such as Cadila and Shree Rama Multitech at almost 50% discount to their offer price.

The fact is that most media companies are producers, producing content for the various television channels and want to ride on the media boom in terms of stock market valuations. They would hardly require more than Rs 500 m currently from the capital market for their business which can be easily funded. The apprehension seems to be reflective of the fact that it is the opportunities of capital availability rather than the opportunities of the business that seem to be dictating the timing of the IPO offerings.

It is important for investors to judge each issue on its merits since it is likely that of the 11 companies mentioned above hardly three to four companies would emerge as key players in this industry.

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