Markets glad at TV-18 calling off indiabulls deal

NetScribes/Rajiv Banerjee

The Indian stock markets reacted favourably to news that TV-18 had called off its equity deal with investment portal, indiabulls.com. The TV-18 scrip closed at Rs 620 on Monday, up 3.2 per cent from its previous close of Rs 601. A total of 31,488 shares were traded at the counter on Monday.

Analysts opined that that if the deal had gone through, it would have had a negative impact on TV-18's stock valuation. "The deal call-off will be positive for the stock as it reduces its cash outflow. Also, the risks associated with TV-18's business model now stand reduced," said Avinash Gorakshakar, analyst at Emkay Shares and Stock Brokers Private Limited, a local brokerage outfit.

Speaking to NetScribes, Raghav Bahl, managing director, TV-18, said that the equity part of the deal has been called off and that there would be no infusion of funds into indiabulls.com. "This decision follows our changed business model where there will be no significant alliances with a single company. Instead, we will have strategic relationships with several companies," said Bahl.

Sameer Gehlaut, CEO, indiabulls.com, confirmed that the deal had been called off. "The equity part of the deal has been called off, but we will continue to provide our services to e-18, the Internet subsidiary of TV-18," said Gehlaut.

He added that with the TV-18 deal having been called off, indiabulls.com would now have the flexibility to enter into multiple partnerships that would drive growth.

TV-18 was earlier supposed to pick up a 26 per cent stake in indiabulls.com. The investment was to be routed through TV-18's Internet subsidiary, e-18. As part of the deal, TV-18 was to pay indiabulls.com Rs 200 million in cash over the next 12 months and Rs 150 million through endorsements on CNBC over a 24-month period.

"The call off will have a positive impact on TV-18's valuations as the market was not very receptive to the deal. The market felt that the investment of a total of Rs 350 million was exorbitant as the valuation of indiabulls.com was considered higher than the actual value," said Subhabrata Majumdar, analyst, First Global, a BSE brokerage firm.

Analysts felt that indiabulls.com did not have the long-term synergy to generate revenue for TV-18, when TV-18 itself had a portal, e-18. "The 26 per cent stake at Rs 350 million amounts to Rs 1.34 billion. The general market perception was that this was a very high valuation for indiabulls.com," said an analyst from a leading brokerage firm.

Gehlaut defended the valuation stating that indiabulls.com was generating sufficient revenues to merit it. "We have generated Rs 4 million in the last four weeks from the Delhi office and we will be shortly opening ten more offices across the country," he said. The revenue was being generated by offering equities, mutual funds and various government schemes, said Gehlaut.

As part of its business plan, e-18, has entered into multiple alliances with leading online brokers like Ask Raymond James, HomeTrade, Indiabulls, Investmart India and Khandwala Securities with the objective of extending its audience reach and relationships by offering transaction capabilities.

Money

Market Impact

Tell us what you think of this report