Chennai: Sun TV Network Ltd’s revenues are likely to be hit because of rising interest rates and recent adverse developments in the Tamil Nadu media industry, chief financial officer V.C. Unnikrishnan said on the sidelines of the company’s annual general meeting (AGM) in Chennai on Monday.
Company executives, though, parried media queries on recent legal and political troubles, while shareholders at the AGM avoided prodding the company managment on the subject.
Sun TV chairman Kalanithi Maran, brother of former Union textiles minister Dayanidhi Maran and grand nephew of Dravida Munnetra Kazhagam (DMK) chief M. Karunanidhi, also avoided questions.
“You know I don’t talk to the media,” Maran said in the Tamil Nadu capital. “I am not going to answer any questions.”
The company has been grappling with government decisions that have put its businesses under pressure ever since J. Jayalalithaa took over as chief minister of Tamil Nadu in May following the victory of her All India Anna Dravida Munnetra Kazhagam (AIADMK), which is the staunch rival of the DMK. The Marans are grand nephews of Karunanidhi and are closely associated with him and his party.
The state government’s recent decision to revive a state-owned cable television business is being seen as a bid to break Sun TV’s near monopoly in the business in Tamil Nadu. The move could erode viewership of Sun’s popular Tamil TV channels, as the state cable service does not currently include them.
Last week, the Tamil Nadu legislature decided to levy a 30% tax on the state’s direct-to-home (DTH) satellite TV business in which Maran’s Sun Direct is a dominant player.
Analysts see the troubles of the media company being compounded by a drop in television advertising due to a slowdown.
Sun TV’s ad revenue growth, which slipped to 23% in 2011 from the previous year’s 38%, is likely to slide to 10% in 2012, according to a Mumbai-based brokerage.
“The TV ad industry witnessed a slump in ad sales till August 2011, mainly on the back of reduced ad spend by sectors like FMCG (fast-moving consumer goods), real estate, banking,” PINC Research’s Namrata Sharma wrote in a September report on the media sector. “Media agencies believe the festive months of October and November should see some volume uptick though with a cautious outlook.”
Unnikrishnan said “it is too early to comment on the ad revenue outlook, which is dependent on the economic conditions”.
The company has also faced legal troubles. The chief operating officer of Sun Pictures was arrested in July on charges of cheating by business associates.
Sun TV’s stock has been under pressure after allegations that the company unfairly benefited during Dayanidhi Maran’s 2004-2007 tenure as telecom minister at the Centre. C. Sivasankaran, the former promoter of Aircel, has accused Maran of forcing him to sell his stake in the telecom company to Malaysia-based Maxis Group, which made an investment of around Rs 600 crore in Sun TV as a quid pro quo.
Dayanidhi is also facing allegations that he had a mini-telephone exchange set up at his Chennai residence to supply 323 telephone lines to the Sun TV Network offices at taxpayer’s expense.
Maran was forced to quit as textiles minister in July over the allegations.
Last week, Sun TV’s shares fell to a 52-week low of Rs 254.90, less than one-third of the share’s 2006 issue price of Rs 875. They rose on Monday, however, up 2.26% to Rs 300.80 on the Bombay Stock Exchange. The benchmark Sensex fell 1.11% to 16,745.35.