Star offloads 26% stake in Balaji Telefilms for Rs 108 crore; shares up 20%

MUMBAI: The "Star" has finally moved out of the Balaji Telefilms household. Rupert Murdoch owned Star Group has offloaded its entire stake of 25.99 per cent in Balaji Telefilms through a block deal on the Metropolitan Stock Exchange of India (MSEI).

As of 30 June, 2015, Murdoch’s company Star Middle East FZ-LLC held 1,69,48,194 shares in the television and film production powerhouse helmed by Ekta Kapoor, which was equivalent to a 25.99 per cent stake. The deal was done at an average price Rs 63.60 per share, which values the transaction at approximately Rs 107.80 crore. The buyer of the shares remains hitherto unknown.

Ekta Kapoor and her family comprising Shobha, Jeetendra and Tusshar Kapoor jointly hold 42.93 per cent stake in the company with a total of 2,79,92,938 shares to their name.

Riding on the back of this news, Balaji Telefilms’ shares rallied on the Bombay Stock Exchange (BSE) on Wednesday 5 August, 2015. The company’s shares were quoting at Rs 95.25, up by Rs 15.85, or 19.96 per cent on the BSE. The stock also hit its 52-week high and there were only buyers and no sellers after the Star Group's exit block sale.

Star India’s Hong Kong-based parent company Star Group Ltd, had bought a 21 per cent stake in Balaji in 2004 for Rs 123 crore through its Dubai-based affiliate Asian Broadcasting FZ-LLC (now known as Star Middle East FZ-LLC). The stake acquisition was then followed by an open offer, after which Star’s shareholding increased to 25.99 per cent.

Pertinent to note here is that Star has been keen on divesting its stake in Balaji Telefilms since 2008 when relations between the once thick friends went sour over low ratings of Balaji’s shows on Star Plus in the wake of intense competition. Rumors were rife in 2008 and then subsequently every other year that Star was planning to sell its entire stake in Balaji.

Throughout 2004, Balaji Telefilms’ shares were trading in the price range of Rs 92 – Rs 105 on the BSE. While the shares touched a high of approximately Rs 188 in early 2006, it was in late 2007 when the company was at its peak with share price of Rs 350+ per piece. In December 2007, Star’s 25.99 per cent stake was worth a whopping Rs 597 crore based on Balaji’s stock price of Rs 352.40 on the BSE.

While Star has finally made the much-vied exit in 2015, it seems as if this deal brought about a negative return for the company as far as valuation is concerned in the face of the investment that was pumped into Balaji Telefilms by the media behemoth more than a decade ago. However, it must be kept in mind, that over the years Star also earned sizeable amount of dividends from the company. Additionally, Star also enjoyed the fruits of intangible benefits such as the exclusive content agreement with the production house for its TRP-raking soaps. That said, it’s simple math that the price tag of Rs 108 crore for 25.99 per cent stake in 2015, is less than Star's buying price of Rs 123 crore for 21 per cent stake way back in 2004.

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