Analysts suggest taking advantage of delisting offer, invest proceeds elsewhere.
At a time when headline indices recorded negative growth, the stock of UTV Software outperformed industry peers in the past year.
The rise was at a time when the bellwether Sensex dipped 24 per cent and mid-cap stocks by 30 per cent. UTV Software’s share jumped 77 per cent in calendar year 2011 to close at Rs 979 as compared to Rs 553 in the beginning. In comparison, peer group stocks in the media and entertainment firm of Eros International rose 27.3 per cent this year, while Zee Entertainment fell 20 per cent.
The US-based Walt Disney owns 50 per cent of the stock and intends to delist it after acquiring 12,215,776 equity shares (29.96 per cent) from public shareholders. It fixed Rs 835.03 to Rs 1,000 per share under the delisting offer. The buyback offer will open on January 16 and close on January 20.
“Definitely, it is a good offer, especially when we look at the markets’ behaviour in the last one year. A majority of stocks and indexes lost 20-25 per cent in the last one year. Hence, investors have fair chances to offload UTV Software stock and invest elsewhere for making higher profit,” said Harish Vasudevan, strategist, SVS Securities.
Ronnie Screwvala and other promoter groups hold 20 per cent in UTV Software. On January 5, Screwvala’s Unilazer Exports and Management Consultants consolidated stake in the company by buying additional shares for Rs 992 each, aggregating Rs 180 crore from another promoter group entity. As of the September quarter, Unilazer Exports and Management Consultants had a 9.22 per cent stake in UTV Software Communications, while Unilazer (Hong Kong) held a 6.29 per cent participating interest in the company.
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A report by IDFC SSKI on the company, released recently, stated: “Given the current challenges faced by UTV in scaling up the gaming vertical, as also the non-linear nature of its film production business, we believe the price of Rs 1,000 per share is attractive. We recommend exiting the stock in the delisting offer.”
In 2008, too, Walt Disney and Unilazer had made an open offer to acquire 20 per cent of UTV equity at Rs 860.79 per share. Tthe stock price crashed to Rs 200 just after the offer ended.
About 10 per cent of the equity in UTV Software has moved to a new set of shareholders since Walt Disney first announced its desire to delist UTV Software in July last year. This indicates that traders are looking at an arbitrage opportunity by buying in the cash market and tendering these in the delisting offer, said an analyst.
After the delisting, Walt Disney will have 80.25 per cent stake, if it successfully acquires the shares of all public stakeholders, while the remaining equity would be held by the Rs Group. However, assuming Disney acquires the shares of UTV Software's other promoter as well, pursuant to a share purchase agreement, it would secure all the stake.
In the second quarter of the current financial year, UTV Software reported a net loss of Rs 28.9 crore, as compared to a net profit of Rs 40.2 crore in the previous year’s corresponding quarter. The loss was attributed to launch of a new entertainment channel, ‘UTV Stars,’ focusing on Bollywood.