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The just-concluded Infomedia18 rights issue was undersubscribed, requiring promoters TV18 to pump in up to Rs12 crore of the unsubscribed portion of the issue, even as TV18 is haemorrhaging cash
It appears that media and entertainment company TV18’s promoters have bailed out its publishing unit Infomedia18’s just-concluded rights issue. A large part of minority shareholders of Infomedia shunned the Rs99.90 crore rights issue. So, the promoters of TV18 decided that the shareholders of TV18 should pony up Rs12 crore towards the expected under-subscription of the rights issue.
The TV18 group had bought Infomedia in 2007, hoping to add print publications to its bouquet of offerings. Infomedia publishes business directories (Yellow Pages), eight consumer titles and 12 trade titles. The business has been draining cash ever since TV18 took it over. In 2008-09, it lost Rs84.65 crore and in the first nine months of this year, it lost another Rs43.15 crore. To sustain the losses, Infomedia chose to make a rights issue which shareholders were lukewarm to.
While it is all right for the ambitious promoters of TV18 to continue to support and bail out an ill-advised move into print media, it leads to a piquant situation for the shareholders of TV18. Money has been flowing out unabated from the coffers of TV18—for the last six quarters at least. Almost all group companies like Infomedia18, Web18 and IBN18 have been reporting losses, unable to sustain the high-cost operations of businesses that have little edge. Indeed, as we reported yesterday, faced with negative cash flows, the companies are being forced to pile on debt in large quantities. But borrowing has its limits. The group has been making rights issues to keep the businesses afloat. A few months ago, TV18 concluded a rights issue to keep its own business going. Now it has supplied Rs12 crore from its own cash-strapped business to Infomedia18.
Last year, in a very ambitious move, Infomedia launched Forbes magazine in India. The magazine was priced at Rs50 in an inaugural offer, which has not been changed so far. The product was pushed through the traditional and primitive print distribution channels, such as hawkers, at enormous cost. Hawkers were given generous incentives to stock the copies. It is not clear whether it has been able to create a niche in the crowded business magazine market. Subsequently, it launched Entrepreneur, a magazine for the small business segment priced at Rs75. These initiatives have only added to the losses so far.
While declaring the results of the December quarter, the company management claimed that “the company is in the process of introducing new technologies in its product offering, so as to cater to newer markets and de-risk the revenue streams. New lines of business are also being added, which along with consolidation of existing products and introduction of new products in the publishing segment are expected to improve the revenues.” However, shareholders obviously remain sceptical about what these new winning products are and whether these would steady the boat.
Bharti AXA has launched an infrastructure fund. But 12 out of the 20 infrastructure funds have underperformed their benchmarks
Bharti AXA Investment Managers has launched the ‘Bharti AXA Focused Infrastructure Fund’ which would mainly have exposure to sectors identified as pure infrastructure like cement, construction, energy, metals and financial services primarily engaged in financing infrastructure projects.
However, the fact remains that of the total 20 infrastructure funds in the market, 12 have underperformed, while eight funds have outperformed since inception. Of these 20 funds, seven funds have been benchmarked against the BSE 100 out of which five have underperformed and the remaining two have outperformed. The net asset values of the funds benchmarked under BSE 100 have given an average return of 6% whereas BSE 100 has gained an average 8%. Bharti AXA’s scheme is an open-ended equity fund and the investment performance of the fund will be benchmarked against the BSE 100 index. The NFO (new fund offer) opened yesterday and closes on 15 February 2010.
The fund has put out detailed analysis of how the BSE 100 index has done over the past three years, when you count only the infrastructue stocks. “Our internal research has indicated that core infrastructure stocks amongst the companies forming the BSE 100 index have outperformed the BSE 100 index by 19% CAGR over a period of three years. By having a focused portfolio of such sectors, we expect to derive the best for our investors through this fund,” said Prateek Agrawal, head (equity), Bharti AXA Investment Managers.
However, this reasoning is not relevant because Bharti AXA is not offering an infrastructure index fund. It is offering an actively managed fund—and we have seen 60% of the actively managed funds have underperformed their simple benchmarks. If they are compared to the adjusted index of BSE 100, the underperformance will be even more glaring.
One interesting aspect of the fund is that unlike the schemes of ICICI Prudential Infrastructure Fund and SBI Infrastructure Fund, this fund will not have any exposure to sectors like automobiles, chemicals, IT, consumer goods, media, paper, pharmacy and textiles. The scheme offers regular and quarterly dividend options having options of dividend reinvestment and payout facilities. Bharti AXA has a total of Rs600 crore assets under management (AUM). Of the total AUM, Rs150 crore is invested in equity and the balance in debt. Bharti AXA Life Insurance is a joint venture between Bharti, with interests in telecom, agri-business and retail, and AXA of France. Bharti holds a 74% stake and AXA holds 26%.