Sun TV tanks 26% as MHA denies security clearance to channels

The stock hit its 52-week low of Rs 257 in morning trade on the NSE. Should you sell?

Kalanithi Maran – controlled Sun TV tanked 26% in morning deals to touch its 52-week low of Rs 257.45 on the National Stock Exchange (NSE) on reports that the Ministry of Home Affairs (MHA) has struck down the proposal by the Information and Broadcasting (I&B) Ministry for giving security clearance to 33 television channels of Sun TV Network.

According to reports, Sun TV had applied to I&B Ministry for renewing its broadcasting licence for 10 years, which required security clearance from the Home Ministry. CLICK HERE FOR THE FULL REPORT

Earlier on April 1, the Enforcement Directorate (ED) attached properties and shares worth Rs 742.58 crore of Sun TV promoter Kalanithi Maran, his wife Kaveri Kalanithi and his brother Dayanidhi Maran related to the Aircel-Maxis case. READ MORE ON AIRCEL MAXIS CASE

This is the second such blow as the company. Recently, it was recently denied security clearance for its 40 radio channels. The Madras High Court has granted the company a stay in this regard till the matter is disposed off.

On Monday, the stock opened at Rs 320.80 on the NSE, also its intra-day high. As many as 30,94,954 had been traded on the NSE till 0940am.

STOCK STRATEGY

So, should you sell the stock given these developments?

“I don’t know whether the licences will be cancelled or not ultimately. I am not going into the right or wrong of this, but this development will not go down well with the foreign institutional investors (FIIs) who own this stock. In my understanding, there is an issue with the promoters and I am not sure if a listed entity can be punished for this. Like SpiceJet, we can see a large investor buy a large stake in the company given the sudden stress in the business,” said G. Chokkalingam, founder & managing director, Equinomics Research & Advisory.

“Given the 26% fall seen on Monday, I think investors who can take some risk should stay invested. The stock is already down over 50% from peak levels and has touched a 52-week low on the NSE. The stock movement, going ahead, will depend on the legal outcome. It will be a long drawn battle as the company will approach the courts to seek relief/recourse,” he adds.

Ambareesh Baliga, an independent analyst also suggests that only those investors who have an appetite for risk can accumulate the stock at the current levels.

“The stock has seen a knee-jerk reaction on Monday following the development. It will not be possible to close a channel or a bouquet of channels just based on these security checks. Sun TV is owned by Indians and it is not a foreign entity that controls it that can be asked to shut and go away. The development has more political overtones than anything else. Possibly for the time being one can stay away from this stock as it is a risky bet. Only high risk traders can look at picking up the stock at these levels,” he says.

Karan Mittal, an analyst tracking the stock with ICICI Securities expects the company to also litigate with regard to the denial of security clearances for its TV channels.

"The stock has already plummeted. We would advise our investors not to enter into any new positions until further clarity on the business continuity emerges. Though the operational performance remains at par, the promoter concerns have been overshadowing the stock. We place the stock under review," he said in a co-authored report with Sneha Agarwal.