Dish TV: dilution fears seem overdone

Dish TV: dilution fears seem overdone
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First Published: Mon, Nov 28 2011. 10 43 PM IST

Updated: Mon, Nov 28 2011. 10 43 PM IST
Dish TV India Ltd’s stock rose 4.3% on Monday to Rs 65 on news reports that the company has got clearance from the Foreign Investment Promotion Board (FIPB) to increase overseas equity to around Rs 980 crore.
Of course, the broader market, too, was up on Monday, with the benchmark Sensex rising 3%. The markets already knew the firm had applied for an FIPB approval to raise money, so analysts maintain it’s not a new development. What’s more, Dish TV’s stock has fallen 13% in the past month, in part because of the same dilution fears.
In an interview to CNBC-TV18, Salil Kapoor, chief operating officer of Dish TV, said, “We have taken this approval only to position ourselves for any advance plans. The great opportunity is digitization, but no plans as of now because it’s just approval that we have taken to position ourselves for that money in case it is required.” As of now, there is no decision on how much to raise and at what point to raise, he added.
The company recently raised prices, which is expected to boost revenue. An increase of 6% on the base pack that 45% of customers subscribe to will drive revenue going forward, points out a note from Emkay Global Financial Services Ltd.
The firm’s net loss for the September quarter was higher at Rs 49 crore against a net loss of Rs 18 crore in the June quarter, primarily on account of a forex loss of Rs 30 crore.
The good news was total operating revenue rose about 5% sequentially to Rs 482 crore and operating profit by 8.6% to Rs 122 crore. Operating performance was better due to the decline in programming and content costs, and other operating expenses.
Dish TV intends to exit the current fiscal with average revenue per user (Arpu) of Rs 160-165. The recent price hike is expected to help the company achieve its Arpu guidance for the year-end.
Long-term growth prospects, as a consequence of the capital-raising, should overcome fears of dilution. As an HDFC Securities Ltd report says, “Valuation remains attractive at 8.5x FY13E EV/Ebitda (earnings before interest, tax, depreciation and amortization), considering superior growth of 33/63% in revenue/Ebitda over FY11-14E.”
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First Published: Mon, Nov 28 2011. 10 43 PM IST