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BL Research Bureau

Dish TV is to raise Rs 1,200 crore by way of a rights offer. The details of the offer are yet to be disclosed. The equity expansion is inevitable, as Dish TV does not have the balance sheet strength to otherwise bankroll its expansion plans for the direct-to-home (DTH) market.

Dish TV recently scaled up its capital expenditure budget to Rs 1,600 crore to meet burgeoning customer acquisition costs. These have been steadily mounting for the incumbents, Dish TV and Tata Sky. The costs threaten to escalate further with the entry of new players such as Reliance Blue Magic and Bharti Telemedia into this space. These factors have weighed heavily on the valuation of Dish TV (the only listed stock in this space). A recent private placement of a 4.9 per cent stake worth Rs 250 crore with private equity player, Indivision, by the company, also fell through.

Shareholders of Dish TV may hold on to the stock and await further details on the pricing of the offer. In the near-term, a couple of factors augur favourably for DTH operators and, by extension, the company. One is the proposal to reduce the DTH licence fee from 10 per cent of gross revenues to 6 per cent. TRAI has also stepped up pressure on broadcasters to offer their channels to DTH operators on an a-la-carte basis and at lower rates, which could considerably reduce content acquisition costs for DTH operators. However, with competitive intensity increasing, Dish TV remains suitable for investors with a high risk appetite, who are prepared to stay on for the long haul.

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Dish TV gets nod for rights issue

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