TV18 & IBN18 smothered under huge interest costs

High interest costs will feature as a permanent expenditure on these companies’ books, leaving almost nothing for shareholders of these cash-guzzling businesses

The December quarter results have thrown up a new reality show for two top television channels: large interest costs that are leading to relentless net losses.

Here is the grim financial picture. IBN18 has reported a small operating profit of Rs4.98 crore for the three months ended December 2009. But net loss was Rs10.96 crore. The reason: IBN18’s consolidated interest costs and other financial charges are up by a whopping 82%, an increase of Rs6.51crore to Rs14.5crore, from Rs7.98crore for the corresponding year-ago period. On a nine-month basis, interest costs and other financial charges are up by a massive 123% in December 2009, an increase of Rs18.08 crore to Rs32.77crore, from Rs14.69crore last year.

TV18 too has registered a huge net loss of Rs41.52 crore for the same quarter. For TV18, although December quarter interest costs have come down by 14%, the nine-monthly interest costs have registered a rise of 25% to Rs85.01 crore, from Rs67.94 crore for the same period last year. Clearly, unless the business turns cash-flow positive, continuous borrowing would lead these companies into a deadly spiral of more and more debt just to keep the operations going.

For over six quarters now, these companies are making losses, requiring them to borrow money to fund their operations. TV18 made a rights issue last year—but at the rate money is flowing out, it will again need additional capital. Will this mean further borrowings? If so, how will the increased debt be serviced with cash flows continuing to be negative? Analysts and experts have all along assumed that all this borrowing was temporary. But it now appears that TV18 has been forced to pile up debt in large quantities just to ensure business survival. With losses continuing even after a full year of economic revival, these interest costs—and net losses—will not disappear easily. High interest costs will feature as a permanent expenditure on their books, leaving almost nothing for shareholders of these cash-guzzling businesses.
 

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World Bank's $2.96-billion loan for roads may be split into tranches

Keeping in mind the immediacy to develop roads, the finance ministry has said that it has currently sought $1 billion from the World Bank out of the $2.96 billion sanctioned, so that the amount can be paid back on time

The World Bank's $2.96-billion (about Rs12,385.90 crore) loan that the transport ministry has sought is likely to come in tranches, with the finance ministry favouring only $1 billion currently over repayment concerns, reports PTI.

"Roads are a multiplier for the economy. Keeping in mind the immediacy to develop roads, we have currently sought $1 billion from the World Bank out of the $2.96 billion sanctioned, so that it can be paid back on time. The remaining will come in tranches," a senior finance ministry official said.

The transport ministry had sought the loan in August 2009 for double-laning of 6,372 km of single-laned highways, out of the total 19,702 km single-laned ones in the country, under the National Highways Development Project (NHDP) Phase IV.

The World Bank had, in December last year, given an 'in-principle' approval to the total loan. "Of this amount ($2.96 billion), the Department of Economic Affairs (DEA) has currently requested the World Bank to deliver a loan of $1 billion and the balance in the next country strategy period starting from 2012," the World Bank said in an email reply.

The World Bank has a periodic country strategy for monetary assistance to different nations. The latest one is up to 2012 for India, the multilateral lender said.

Neither the DEA official nor the World Bank gave specifics of the terms of the loan.

"A clearer picture on the scope of this assistance will be available in the next couple of months," the World Bank's email added.
 

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No immediate pressure on interest rates: HSBC

HSBC said on Thursday that there will be no immediate pressure on lending rates even if the RBI squeezes money supply to contain inflationary expectations

Foreign lender Hongkong and Shanghai Banking Corp (HSBC) on Thursday said that there will be no immediate pressure on lending rates even if the Reserve Bank of India (RBI) squeezes money supply to contain inflationary expectations, reports PTI.

Calling for retaining fiscal stimulus to carry forward the growth process, HSBC India head Naina Lal Kidwai told reporters that interest rates could only gradually rise in the next six months.

"That (interest rate rise) is going to happen next month? No. In the next six months, (maybe a) gradual (hike)," she said on the sidelines of a micro-finance conference in New Delhi.

The RBI is slated to come out with its third quarter monetary policy on 29th January. She added that inflation is a concern and will be watched. However, monetary policy is not the only way to contain inflation.

Wholesale price inflation rose to 7.31% in December from 4.78% in the previous month, higher than the 6.5% level by this fiscal-end projected by the RBI. Ms Kidwai added that there is lot of liquidity in banks.

"Can some of this (liquidity) be mopped out? Yes. A small Cash Reserve Ratio hike for example of 0.25% would mean just about Rs8,000 crore going out of the system. It may signal an important change," she added.

Yesterday, the country's largest lender, State Bank of India, had said that interest rates are likely to remain stable as there is surplus liquidity in the system.

 

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