Its Time To Exit

Oswal Greentech has sold its entire holding in NDTV for ₹75 crore

In a couple of bulk deals on the BSE, the Oswal group, founded by late businessman Abhey Oswal has sold its entire holding in New Delhi Television for a consideration of Rs.75.43 crore. Investment firm Oswal Greentech sold 91.36 lakh shares over two transactions on Monday (August 29) and Thursday (September 1). The shares off-loaded in the market were picked up by a couple of Mauritius-based entities. LTS Investment Fund grabbed the bulk of it – 9.75%, while the balance 4.42% was picked up by an entity called Eriska Investment Fund.

Data from Ace Equity shows that Eriska Investment Fund has names like India Steel Works, International Conveyors, JBF Industries, Modern India, Pritish Nandy Communications and Uttam Galva Steels in its portfolio, while LTS Investment Fund has a longer list that includes names like Infibeam, Kiri Industries, GMR Infrastructure, Modern India and JMT Auto. The late Abhey Oswal had bought the 14.17% stake in December, 2011, for Rs.24.34 crore at a price of Rs.26.64 per share. Oswal Greentech exited the investment at an average price of Rs.83.5, netting it a near 3X return.  

YTD, the stock has gained 11.5% as against Sensex’s gain of 8.8%. Since mid-August, the stock has rallied 23% amid the launch of two NDTV channels on Virgin Cable in UK i.e. NDTV India and a new channel NDTV Spice. Another bit of good news for the company has been last month’s order by Income Tax Appellate Tribunal (ITAT) that disallowed additional tax claim of more than Rs.22 crore for assessment years 2007-08 and 2008-09 and upheld NDTV’s tax plea. After this order, IT department’s additional tax claims have been disallowed for consecutive years – AY 2006-07 to 2008-09. However, ITAT is yet to take a call on tax claims related to the next two assessment years.  

That said the operating environment has been a dampener. In the FY16 annual report, the management cites disappointing subscription growth as one of the reasons for its weak performance. It said, “The growth in subscription revenues in the last year has been far below expectation. This was because Phase 3 of digitisation failed to meet its target and the expected transformation of the business model as a result of digitisation is yet to play out."

Due to the company’s weak financial performance investors have kept looking the other way. The company has reported losses in 10 of the last 11 financial years. Over FY12-16, the company’s net sales have grown at a tepid rate of 4% CAGR. In Q1FY17, the company’s net loss widened to Rs.41.82 crore from Rs.27.3 crore in the corresponding period of FY16.

Unsurprisingly, the stock has been avoided by domestic mutual funds with only Sundaram AMC holding a minor stake of 0.09%. In the FPI category, BNP Paribas Arbitrage has a stake of 4.59%. Incidentally, the fund also held a more than 1% stake in Jindal Steel & Power which is run by Oswal’s son-in law Naveen Jindal.