Buyout May Hurt Zee

Further, with the company having irreconcilable differences with the Hong Kong-based Newscorp, speculation is rife amongst analysts about Zee Telefilms buying out the latters 50 per cent equity stake in Asia Today Ltd (ATL).

This, incidentally, is the outfit which has leased Zee the transponders on Asiasat-1 for the family of channels.

Although the companys performance for the six months ended September 1996 is impressive to say the least, a buyout by Zee TV could pose some problems. The company has investments totalling Rs 5.32 crore as on March 1996, of which almost 96 per cent is in group and subsidiary companies.

The company has also forwarded a small chunk of Rs 5.49 crore as loans and advances to its wholly-owned subsidiary.

Outstanding debtors over six months have also jumped from Rs 82,903 to Rs 4.61 crore for the year ended March 1996. Additionally, fresh borrowings are also likely to have a crippling effect on Zees interest burden, which has already recorded a sharp jump in the first six months of the current year.

For the six months ended September 1996, the interest burden moved up by more than three times to Rs 1.93 crore.

Thus, if Zee insists on buying out Newscorps 50 per cent equity in ATL, a cash crunch together with the trimmings of declining profitability would become a distinct possibility for the company.