The Hindu Business Line : Greycells Entertainment: Reject

The company does not have a track record in the entertainment business, but the background of the acquirers suggests that there may be an emerging story.

SHAREHOLDERS of Greycells Entertainment can reject the open offer, as there is the possibility that the company could emerge as a player in the entertainment business space. The company does not have a track record in this line of business, but the background of the acquirers indicates that it may be used as a vehicle to channelise their ambitions in this business. The open offer is at Rs 20 per share.

The stock is listed on the Bombay Stock Exchange. It acquired its listing status as a non-banking finance company (MJP Leasing) and subsequently changed its name to Concept Productions in 2003. The company has shed its status as an NBFC and moved into the business of film distribution and event management. Its performance has been insipid. In the first quarter of last year, it acquired the business of Greycells Communication and Production, a privately-held company. The name was then changed to Greycells Entertainment.

The open offer has been triggered by a change in control following the allotment of shares on a preferential basis to Ms Uday Sinh Walia and Mrs Simeron Ghei, who now hold a 21 per cent stake and appear to have been shareholders of the privately-held company that was merged to create the new entity. With persons acting in concert, they collectively have a stake of about 35 per cent, which will rise to 55 per cent if the open offer succeeds.

There has also been a substantial mobilisation of cash by issue of shares on a preferential basis in October 2005. These are subject to a lock-in period that expires in October this year. With this stipulation, there is no clarity on how the open offer can succeed. It appears to be a procedural formality that is being undertaken to comply with SEBI takeover regulations.

The stock has been traded only once in the past three years (last October, 50 shares changed hands at Rs 405). The illiquid nature may be a strong case for accepting the offer. The poor state of its financials will also point to such a course. But following the change in control and infusion of cash, there may be a business idea that could offer better value than the Rs 20 on offer.

In this context, the background of Mr Uday Sinh Walia has to be noted. He has had experience in advertising, television programming and sports/event management. According to the letter of offer, he has handled customised sports programming for events such as the 1998 Asian Games and the 1999 ICC Cricket World Cup.

This background suggests that there is a business plan that has now acquired a listed face following the takeover of an obscure finance company. If there is a concrete story, the stock could be more actively traded.

Shares issued on a preferential basis have also not been listed as yet for trading and the procedural formalities are under completion, according to the letter of offer. In this backdrop, shareholders could reject the open offer.

Offer details: The open offer is for 6.18-lakh shares accounting for 20 per cent of the equity. The capital base is Rs 3.09 crore. Aryaman Financial Services is the manager to the offer and Bigshare Services is the registrar. The open offer closes on January 18.

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