Drop in Dish TV shares dampens rights issue

The Rs 1,140-crore rights issue of Dish TV is in a limbo after a sharp drop in its share price on the closing day. The stock, which fell 6.4 per cent on Friday and closed at Rs 19, is lower by Rs 3 than the rights issue price of Rs 22. With the fall, banking sources said, the institutional investors including LIC, which holds 2.88 per cent in Dish TV, have opted to keep away from subscribing to the issue.

“The shareholders would have subscribed 30-40 per cent of issue. The unsubscribed portion of the issue is expected to be bought by promoters. If the promoters buy the permitted 90 per cent of the issue, their holding in Dish TV will rise to 75 per cent from the current 58 per cent,” said sources.

In the last one week, the stock has fallen 11.21 per cent on a weak Indian market. At the current price, it is cheaper for the shareholders to buy share from the open market rather than subscribing to the issue at Rs 22 a share.

The direct-to-home broadcast vehicle of Subhash Chandra’s Zee Network is expected to raise Rs 1,026 crore — 90 per cent of the issue — with promoters’s contribution. For completing the rights issue, a minimum subscription of 90 per cent is mandatory as pert the Sebi guidelines. Otherwise, the company has to refund the entire subscription amount within 15 days.

The proceeds of the rights issue, which opened on December 12, will be used for company’s Rs 1,600-crore expansion that will be completed by 2010. With the DTH platform gaining impetus in the country, Dish TV has plans to include another 200 channels this year to retain its lead. The DTH sector is primarily driven by volumes as the industry works on a subscription basis.

The company is also planning to strengthen its value-added services vertical. Moreover, it is looking at expanding business through multi-dwelling units (MDUs) and mobile MDUs. A mobile MDU costs about Rs 1.5 lakh and can be used in vehicles.