Star India sells 26% stake in Balaji Telefilms for Rs.108 crore
Shares of Balaji Telefilms gained as much as 20%, their sharpest rise since 12 April 2010, after this large block deal on the stock
New Delhi: Star India Pvt. Ltd, a unit of 21st Century Fox has sold its 26% stake in Balaji Telefilms Ltd, acquired over 11 years ago, to the company’s promoters in a deal worth Rs.108 crore—a discount to its acquisition cost.
On Wednesday, Star India chief executive Uday Shankar confirmed the same.
“This confirms Star’s exit of a minority stake of 25.99% in Balaji Telefilms. Axis Capital acted as advisors to Star and also executed the on-market sale on 5 August. This is in line with our strategy to focus on core businesses where Star has the ability to shape and scale the future growth path of its investments. Our programming and contractual relationships with Balaji are deep and we continue to work on strengthening them to our mutual benefit,” he said in an emailed statement.
Star India, which has had plans to exit Balaji Telefilms for many years, was waiting for the right valuation to close the deal.
Star India bought the stake in Balaji Telefilms, promoted by Ekta Kapoor, in 2004 as all of Balaji’s soaps were doing very well for Star Plus, improving the channel’s viewership. Among them were the hugely popular Kahani Ghar Ghar ki, Kyunki Saas Bhi Kabhi Bahu Thi, and Kasauti Zindagi ki. Star India initially picked up a 21% stake in Balaji Telefilms in 2004 through Dubai-based affiliate Asian Broadcasting FZ-Llc from the promoters for Rs.123 crore. Later, it increased its stake to 25.99% through an open offer.
The company thought it wise to buy shares in Balaji to be able to put some restrictions on the content company. For instance, Balaji was not allowed to produce prime-time serials for other channels. The idea was to exercise some control over the software house.
The relationship worked for a while. Soon, Balaji asked to be paid a premium if its soaps achieved a certain TRP (television rating point). Star agreed. But once the viewership, hence, TRP of those soaps, declined below a certain threshold, Star asked for a refund. The partners sparred over the issue. Gradually, Star’s dependence on Balaji reduced. Ever since, Star has been looking to sell its stake in the company.
Balaji had the first right of refusal, but the two did not agree on a price. Star struggled to sell the stake to other buyers in the market. “The actual valuation of this deal should have been 15-20% higher than the original prices of Rs.123 crore. The delay has got to do with the fact that there were no takers for a stake in a television content company,” said an analyst who asked not to be identified.
The transaction took place on the Metropolitan Stock Exchange of India (MSEI), formerly known as MCX Stock Exchange, a trading platform recognised by market regulator Sebi (Securities and Exchange Board of India).
Shares of Balaji Telefilms gained as much as 20%, their sharpest rise since 12 April 2010, after this large block deal on the stock. Around 16.9 million equity shares or 25.99% stake of the company has changed hands in block deals at an average price of Rs.63.60 a share, according to data from the Metropolitan Stock Exchange of India website. The sale price was much lower than Tuesday’s close of Rs.79.40. On Wednesday, the shares closed at Rs.95.25 each.
Balaji, owned by Ekta Kapoor and Shobha Kapoor, will announce its quarterly financial results on 13 August. Balaji Telefilms separately said Ekta Kapoor and Shobha Kapoor have acquired 28,43,000 shares of the at Rs.63.60 a share.
Ravindra Sonavane contributed to this story.
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