Sun TV, Raj TV rally after Sasikala's conviction; analysts advise exit

Shares of Tamil Nadu - based television channels, Sun TV and Raj Television Network (RAJ TV) spiked up to 13%, after the Supreme Court (SC) quashed Karnataka High Court verdict that acquitted AIADMK General Secretary, Sasikala Natarajan, in the disproportionate assets case.

Raj Television Network surged as much as 13% to Rs 73, while Sun TV rose 4% to Rs 741 on the Bombay Stock Exchange (BSE). 

Following the development, Sasikala Natrajan will have to surrender herself to jail for undergoing remaining jail term, reports suggest.

Supreme Court, however, abated the appeal proceedings against late Jayalalithaa owing to her death in December last year. SC, thereby, restores in toto the conviction and sentence awarded by the trial court in Bengaluru to all the accused, news reports say.

Given the verdict, analysts do not expect much impact on the fortunes of both these companies going ahead. On the contrary, they suggest investors exit these stocks on any up move.

“The verdict could see O Paneerselvam form a government and become the chief minister of Tamil Nadu. Sun TV, on the other hand, has an affiliation with the opposition – the DMK. Fundamentally too, the valuations appear stretched. RAJ TV is not doing well business-wise. For RAJ TV, it doesn’t matter which government is at the helm in Tamil Nadu as it has lost out to competition. I suggest investors use the rally to exit both these counters,” said G. Chokkalingam, founder & managing director of Equinomics Research & Advisory.

For SUN TV, growth in the near-to medium-term analysts say would be contingent on: 1) resolution of Phase III digitisation (despite Arasu remaining a drag); and 2) continued healthy growth in DTH subscriptions driven by strong bouquet offering. 

"Sustenance of market share improvement would strengthen its bargaining power on both Cable TV and DTH subscription. We expect Cable TV and DTH subscription revenue to grow at 12% CAGR (FY16-19E). With legal overhang behind us and Increased confidence on higher than industry advertisement growth has led to higher target multiple. Key risks include unfavorable judgment in SC against promoters in CBI cases and lack of sustenance of viewership share," cautions Dhananjay Sinha, head of institutional research at Emkay Global.