The shares of Network18 Media & Investments and TV18 Broadcast tumbled up to 19% on the BSE and NSE on Thursday's intra-day trade due to investors booking profit in the shares of the two companies after Reliance and Viacom18 announced a partnership with Uday Shankar-led investment firm Bodhi Tree Systems.
TV18 owns 51% stake in Viacom18.
Network18 shared closed at Rs 91.30, down 19.7% from Wednesday’s closing at Rs 113.70. The shares of Network18 witnessed 2.5 times jump in trading volumes. A combined around 25 million equity shares had changed hands on the NSE and BSE.
On the other hand, Network18’s subsidiary TV18 Broadcast slipped 17.7% to Rs 61.85 on the BSE in the intra-day trade. Trading volumes jumped over four-fold with a combined 148 million equity shares changing hands on the NSE and BSE.
Market experts pointed out that “no clarity” from the company and lack of communication to shareholders regarding the valuation of the deal, dilution post-deal, and funds to be infused in equity, could have led to the profit-booking by investors.
Also, the concerns in the market about Viacom18’s high probability of aggressively bidding for IPL media rights. The network may struggle to justify the high cost of IPL media rights in its books.
In its report on Thursday, BestMediaInfo.com highlighted the strategies Uday Shankar used to build Star Sports and Hotstar businesses riding on IPL, and how he can replicate the same strategy to scale up Viacom18 business.
Investors were apparently apprehensive about the company’s profits and return ratios.
Experts said that Jio Cinema will be made a part of Viacom18 as per the deal and TV18 will have to pay some reimbursement for Jio Cinema to Reliance. The reimbursement amount is expected to be around Rs 12,000 crore and Viacom18 may have to dilute its valuation furthermore.