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Shares of Sun TV soared to a lifetime high on Monday, after a special court dismissed all charges against the company’s founder in the Aircel-Maxis case. The judgment triggered a spate of brokerage rating upgrades on Sun TV.
25% riseThe stock touched an all-time high of ₹719 on the NSE before settling at ₹689.25 against the previous day’s close of ₹683.35. From Thursday’s close ₹551, the stock jumped 25 per cent on Friday following the verdict. One of the main reasons for the stock to surge a whopping 30 per cent intraday on Friday (February 3) was short-covering in the futures and options (F&O) segment. “Ahead of the verdict, there was huge build-up of short positions, expecting an unfavourable verdict. But with the verdict going in favour of the Maran brothers, traders were forced to cover the shorts, resulting in huge gain for the stock,” said an analyst with a Mumbai-based firm.
The allegation in the Aircel-Maxis case was that the then telecom minister Dayanidhi Maran, brother of Sun’s founder Kalanithi Maran, had tried to pressurise Aircel into letting go of its stake to Maxis in return for an investment of ₹549 crore in Sun Direct. According to CLSA, the acquittal ends a long-standing legal overhang. Also, political risks for Sun TV have reduced recently, said the global brokerage firm, which upgraded the stock to ‘Buy’ (from ‘Sell’) with a revised target price of ₹661 (₹438 earlier) .
“Though a sustained re-rating of the Sun TV stock remains pegged to network advertising growth, the reduction in legal and political risks could be a significant share-price catalyst,” said CLSA .
According to Kotak Securities: “We revisit our valuation/ recommendation on Sun TV Network post the 24 per cent run-up in the stock, which followed a favourable judgment for its promoters in the Aircel-Maxis case. While the judgment has been challenged in a higher court (next hearing on February 8), and we are in no position to take a call on the final verdict, we believe the (favourable) judgment of the special court is likely to reduce the overhang on the stock.” Kotak Securities raised the target price to ₹772 from ₹683 after the verdict.
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