Market cap shrinks, cable companies eye digitisation

MUMBAI: Den Networks shares have crashed to a new low and wild swings in the global economy have brought down the market cap of one of India‘s largest cable TV companies to Rs 5.03 billion.

EMSAF Mauritius, part of the $10 billion Emerging Markets Management LLC, has trimmed its holdings as the shares tanked for the third day in a row. Earlier, Fidelity had eliminated its holdings in Den.

Shares of Den fell 9.93 per cent to close Thursday at Rs 38.55 on the BSE after it hit lower circuit. This is the third big slide, after tumbling 20 per cent on both Tuesday and Wednesday.

"Selling pressure from two foreign funds have triggered the fall. The market cap of Den at one stage was over Rs 24 billion. This could reflect on a negative sentiment on the cable TV sector till the government mandates digitisation," an analyst at a broking firm said.

EMSAF Mauritius, a pre-IPO investor, sold 1.6 million shares on 17 August, trigerring a 20 per cent fall that day as the scrip closed at Rs 42.8 on the BSE. EMSAF sold 700,802 shares on the BSE at Rs 42.82 per share and 942,875 shares at Rs 42.81 on the NSE.

In July 2009, Den had raised Rs 750 million from EMSAF Mauritius. As of 30 June 2011, EMSAF was holding 3.58 million shares amounting to 2.74 per cent stake in Den Networks.

Raghav Bahl-promoted Network18 Group has made its intentions clear that it wants to exit from Den. It has cut its stake to 4.96 per cent, according to data provided by the company till 30 June 2011. This is down from 7.55 per cent it held in December 2009.

Den, however, is sitting on a cash of Rs 2.27 billion while its debt is Rs 1.25 billion. "The company does not have any fund-raising plan at the moment. So the fall in the scrip price will not have any impact. The company continues to perform well and the fiscal Ebitda is over Rs 1 billion," a senior official of the company said on condition of anonymity..

The erosion in market capitalisation is not confined to Den. Hathway Cable & Datacom, the other big MSO which is listed, has seen its market cap shrink to Rs 12.18 billion. Though less steep, the shares have fallen continuously since 10 August to close Thursday at Rs 85.30 on the BSE.

"Hathway‘s market cap has almost halved but it has found resistance at higher price points. The two cable companies will post a strong recovery once digitisation is mandated by the government," a media analyst said.
The fall in market value has made it difficult for other cable companies to raise capital. Citigroup Venture Capital-controlled You Broadband and Cable has been unable to go ahead with its proposed Rs 3.58 billion initial public offering (IPO) while IndusInd Media and Communications has failed to conclude talks with investors for raising Rs 5 billion.

"Cable companies will have to win back investor faith. Capital-raising at such high valuations will be extremely difficult even as DTH is adding volumes. While DTH has to evolve a profitable model, multi-system operators need more last mile consolidation," a media analyst said.

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