The Unit Trust of India (UTI) had invested in at least two media companies - Broadcast WorldWide and Numero Uno International- through private placement despite comments from its equity research cell of not subscribing for the former and nil recommendation in the other.
In its replies to the joint parliamentary committee on stock scam that has now begun investigating the UTI also, the trust has disclosed that it bought shares of Broadcast WorldWide for Rs 7.5 crore even though the company was not even listed on any of the bourses in 1999.
The equity cell had said "given the steep valuation and the lock-in involved we recommend that the trust may not subscribe to the private placement." But UTI in its reply to JPC has said that investments in media stocks was part of its decision to increase its exposure to media stocks fuelled by the Ficci-Arthur Andersen study on how the entertainment and media companies are expected to grow rapidly in the liberalised economy of the nineties. Accordingly, UTI has informed that it invested Rs 1,029 crore in media stocks of 17 companies, which included a mega subscription of Rs 837.58 crore in Zee telefilms from 1999 onwards.
But as on June 30 of this year the market value of the total investment by UTI in media companies has dropped to Rs 223 crore only. The same report says that the value of its holdings in Zee Telefilms has crashed to Rs 179.48 crore.
In the rush to invest in media stocks the trust picked up 9 primary issues including Cinevista Communications, Galaxy Entertainment, Pritish Nandy Communications and TV -18. For Numero Uno and Moving Picture Company the equity cell had given nil recommendation. UTI ultimately picked up 8 lakh shares of Moving Pictures for Rs 3.20 crore at Rs 40 per share and 4 lakh share of Numero Uno for Rs 9.57 crore at Rs 500 per share.
In its defence the trust has said the premium for private placements were arrived at on the basis of the Securities and Exchange Board of India guidelines. For investing in Broadcast WorldWide and Numero Uno, UTI said, it relied on parameters such as discounted cash flow valuation, price earning multiple and industry scenario among others.
