The Hindu Business Line : Dish TV: Uncertainty ahead on cancellation of pref offer

Dish TV has cancelled the Rs 250-crore preferential allotment of equity shares and warrants to Indivision India Partners. The placement was made a couple of months ago, and appears to have fallen through due to the steep decline in the stock price of Dish TV in recent weeks. This renews the pressure on funding, although the company claims to have a plan in place to take care of its requirements.

Shares worth Rs 125 crore were issued at Rs 100 per share, while 9.6 lakh warrants were also issued on terms that they could be converted at Rs 130 per share within a period of 18 months from the date of the issue. With the stock price of Dish TV falling to Rs 60 in the recent meltdown, investors wished to cancel subscription to the warrants, according to the release.

Dish TV appears to have decided to go for alternative means of funding and has cancelled the entire issue of both shares and warrants.

Dish TV had outlined a capital expenditure plan of Rs 1,100 crore over the next two-three years. This was to be funded through a mix of equity (preferential allotment to investors and promoter contribution) and debt. With the cancellation of the issue, fresh placements may have to be made or debt would have to be stepped up. The recent cancellation does raise concerns on the company’s ability to raise equity while the stock continues to suffer.

The demand on financial resources is beginning to escalate, as fresh competition from Sun’s DTH and soon-to-be launched Big TV threaten to further increase customer subsidisation costs. Tata Sky recently slashed the price of its set-top boxes to Rs 1,500, half of that of Dish TV.

More capex may be in store, if incumbents Dish TV and Tata Sky are forced to make their set-top boxes compatible with the new entrants, who operate on a different technology (MPEG 4 compression). TRAI has recommended that set-top boxes be made interoperable, to allow consumers to switch between service providers. While the company continues to record strong subscriber additions, unless the funding is tied up, the stock of Dish TV may remain subdued for sometime.

More Stories on : Radio/TV | Stocks | Preferential Allotments

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