Chennai: Sun TV Network Ltd said profit rose 12% in the March quarter from the year earlier as the broadcaster maintained robust advertisement revenue growth for the second successive quarter after a year in which it had slumped, dragging down net income.

Net profit rose to 177.50 crore in the three months ended March from 159 crore in the year earlier, in line with expectations. A survey of analysts’ estimates compiled by Bloomberg had expected profit at 178 crore.

The earnings seem to indicate that Sun Group founder, chairman and managing director Kalanithi Maran has been able to ride out the rough weather after it inked a pact with state-run Tamil Nadu Arasu Cable TV Corp in July last year.

The Chennai-based broadcaster’s revenue rose 10.7% to 433 crore, “more than our 8% growth estimate", said Amit Patel, an analyst with Mumbai-based Angel Broking Ltd. Advertising revenue rose 14.6% to 269 crore.

Costs have gone up with the broadcaster deciding to produce most of its programmes inhouse, squeezing margins, which narrowed 311 basis points year-on-year to 73.7%. A basis point is 0.01 percentage point.

The outlook for the company is positive as it has decided to raise advertising rates by an average 19% for Sun TV from 15 July, said Patel.

Prime time advertisement rates are being increased with effect from 15 July by an average 19% and consequently, telecast fees from producers are also being raised proportionately, the company said in a press release.

The increases come after a gap of two years reflecting an improvement seen in the advertisement environment which has been sluggish, said Shobhit Khare, an analyst with Motilal Oswal Securities Ltd. Sun TV last hiked its rates in April 2011.

“The advertisement environment looks optimistic compared with the previous year," said S. L. Narayanan, chief financial officer of the Sun Group.

A Mumbai-based analyst who tracks the company but did not want to be named, said the move was a positive one on a long-term perspective but it was only for one channel. Sun TV contributes about 40% of the company’s revenue, so on an overall basis, it translates into just a 2.7% increase and could be jeopardized in case viewership falls.

There has been significant traction in the direct-to-home (DTH) business compared with September and December 2012 quarters, Narayanan said. DTH clocked revenue of 100 crore for the March quarter, up 14% from the year earlier.

Asked about the dilution of the promoter’s stake to 75%, as required by the regulator by next month’s deadline, and whether Sun TV was in talks with foreign investors, Narayanan declined to comment, stating that it was a matter regarding the company’s founders.

Maran, who holds 77% of Sun TV Network, is expected to sell 2% of his holdings and raise about 330 crore. The capital markets regulator has mandated that all listed companies outside government control should reduce their promoters’ stake to at least 75% by June.

Foreign institutional investors held a 14.06% stake, domestic institutional investors 1.87% and others 7.07% on 31 March.

Sun TV subsidiaries, Kal Radio Ltd and South Asia Ltd posted a strong turnaround with robust revenue and reported profit, said the earnings press release without disclosing financial details.

Shares of Sun TV Network closed at 429, down 3.17% on the Bombay Stock Exchange, on Friday, while the benchmark Sensex gained 0.19% to 20,286.12 points.