TV 18: Picture perfect

TV 18's restructuring scheme is more shareholder-friendly

TV 18 has modified its restructuring proposal in response to shareholder concerns. The basics remain the same: the channels Awaaz and IBN-CNN will be transferred to TV 18 and Network 18 respectively, from promoter entities.

The new holding company, Network 18, will be formed and for every ten shares in TV 18 of Rs ten paid up, shareholders will get 12 share of Network 18 of Rs five paid-up and 14 shares in the new TV 18 of Rs 5 paid-up.

Network 18 will now have a 51 per cent stake in TV 18 compared with 53 per cent proposed earlier. Also, Raghav Bahl, the promoter, will now have a stake of 51 per cent in Network 18 compared with 55.4 per cent proposed earlier.

The public will hold a higher share of 38.44 per cent in Network 18 compared with 34.6 per cent earlier. Thus, while earlier, Bahl's effective stake in TV 18 India was going up to 29.4 per cent, now it will be 26 per cent.

Bahl will now transfer 10.56 per cent of Network 18 shares to a trust, and these shares will be sold once Network 18 is listed and the proceeds used for TV 18.

The IPO of Network 18 has been dropped but it will divest 2.07 per cent of its holding in TV 18 in the open market, and the funds will be used in TV 18. The independent valuers appear to to have valued Awaaz and IBN-CNN at Rs 500 crore.

Assuming 30 per cent of this is for Awaaz, CNN-IBN has been valued at Rs 350 crore, which analysts believe is a premium valuation given that CNN-IBN is yet to prove its mettle.

The market capitalisation of NDTV, which has three channels, is Rs 1230 crore. Thus, CNN-IBN has been transferred at a much higher valuation than justified.

Since the funding for both Awaaz and CNN-IBN had come from TV 18, it was expected that the effective non-promoter shareholding in TV 18 would remain 71 per cent, however this will fall to 63.9 per cent.

However, shareholders of TV 18 will benefit from the proceeds of the sale by the trust, as well as the shares sold by Network 18.

Motorcycle sales: losing momentum

Hero Honda and Bajaj Auto have reported lacklustre growth in their motorcycle sales during December 2005. In the case of Bajaj, sales rose merely 3 per cent y-o-y to 148,263 units in December 2005, while Hero Honda's sales rose 6.2 per cent to 230,751 units.

TVS Motors, however, managed to grow faster than the top two players in December 2005, with its motorcycle sales expanding 8 per cent y-o-y to 68,724 units in December 2005.

Faster sales growth at TVS Motor vis-a-vis its peers is being attributed to a lower base effect for the company in the previous year.

Also, as the company derives a significant portion of its revenues from the south, it was better able to leverage the traditional purchase of two-wheelers prior to the Pongal festival in January, and benefit from Star City launch in mid-2005.

Analysts highlight that this year, the winter season has been colder than normal in several northern states, which affects two-wheeler sales.

The stock market had a mixed reaction to last month's sales figures "" Bajaj Auto rose 0.2 per cent to Rs 2004.75 on Monday, while Hero Honda fell about 1.5 per cent to Rs 846.

This is the second month in a row of sluggish motorcycle sales, as a significant portion of Diwali purchases was reflected in October.

Hence, players such as Bajaj Auto saw motorcycle sales grow merely 2 per cent y-o-y in November 2005. Going forward, analysts points out that two-wheeler monthly sales are expected to recover and that's thanks to domestic demand still showing signs of staying robust.

The market appears to have factored in the growth opportunities, with Bajaj Auto trading at about 19.4 times estimated FY06 earnings, while Hero Honda gets a discounting of about 17.8 times.

with contributions from Shobhana Subramanian and Amriteshwar Mathur