Balaji Telefilms: reworking the stake game...

Balaji Telefilms Ltd’s (BTL) decision to end its four-year association with the Star Group, under which an associate company of Rupert Murdoch’s media conglomerate held a 25.99% stake in BTL, could well prove to be a blessing in disguise for the latter, analysts said.

As per an agreement reached between the two parties and approved by BTL board, the promoters of the Indian company will be allowed to buy back the 25.99% stake from Asian Broadcasting FZ-LLC (ABF), an associate of Star Group within eight months, for an average price of Rs 190 per share, failing which this stake can be sold to any non-competing entity.

At the agreed price of Rs 190 per share, which represents a premium of 9.8% over the current market price, ABF’s holding is worth Rs 322.01 crore. As per Tuesday’s closing price, Balaji Tele’s market cap was at Rs 1,104 crore.

Anand Shah, media analyst, Angel Broking reckoned, “The breaking of the alliance between the two was long overdue and the split is happening in a very cordial way. It is very unlikely that Balaji will increase its stake beyond the limit which will trigger an open offer. That comes to around 4.99% and the remaining stake will expectedly be placed with a syndicate of private equity players”.

Talking about the implications of the deal on the company’s future prospects, he said, “The company is well placed as far the as number of shows are concerned. The implication of the parting will be understood only after the lapse of the exclusivity contract with the Star TV, which is after two to three quarters. Post the break, Balaji Telefilms will be able to dish out shows in many other channels in the same category and that too on the prime slot”. Farokh Balsara, head of media and entertainment, Ernst & Young India, said, “Most likely Balaji will bring in a third party investor to buy back the stake from Star, who would also make additional investment in the company.” Sources reveal that Balaji may now roll out regional language channels in South India.