After it palms off its loss-making subsidiaries to foolish strategic investors, what can stop NDTV from becoming a sick company?
NDTV reported a net loss of Rs34.27 crore for September quarter this year, on an operational income of Rs65.65 crore. This is not surprise. After all, it had reported a net loss of Rs11.85 crore on an income of Rs71.66 crore in the corresponding quarter last year. Indeed, NDTV has been making losses ever since it got listed. What is also not surprising is the company's statement said that revenues were "buoyant" in October and "we expect to see a turnaround in the next two quarters." Investors have been fed with enough of such rosy scenarios before. The facts have always turned out to be otherwise. What is surprising is that the company is still operational.
The fact is, NDTV has rarely made money from operations. For the last few years, its consolidated operations have been making cash losses and it has been running on money made by selling loss-making subsidiaries to foolish strategic investors like Turner International. This business of passing on the parcel is continuing even now.
In late October, NDTV has roped in Astro All Asia Networks Plc with which it will create a strategic alliance for lifestyle channels in India. Astro will acquire a 49% stake in NDTV Lifestyle by putting in $40 million, while the balance will be held by the company. NDTV Lifestyle operates NDTV Good Times, a loss-making channel with little viewership. Why Astro should be valuing this junk at $80 million beats us but NDTV has always found such buyers. NDTV Lifestyle was earlier being palmed off to Scripps of US.
After this, there will be little left to palm off. Whatever is left is losing money. Consolidated income from operations for the quarter was Rs78.48 crore and net loss was Rs 67.63 crore. This September quarter NDTV wrote off Rs24.18 as permanent loss of various investments in its subsidiaries.
NDTV, which runs channels like NDTV 24X7, NDTV India and NDTV Profit, has tried to be a broadcaster with a wide bouquet of channels but these have all flopped because of its gold-plated operations in a cut-throat business. Salaries at NDTV are humungous; carriage fees charged by distributors are high, while the advertising pie is hardly expanding. All this was obvious since 2005-06.
NDTV is a live example of two facts of the marketplace: One, private equity investors often suffer from gross misjudgement and two, glamour stocks usually deliver unglamorous returns. When launching the initial public offering (IPO) in April 2004, Prannoy Roy told investors: "We have historically made profits all through and paid good dividends. Investors should consider this while taking a decision." NDTV was backed by top private equity investors.
However, the fact is that before NDTV got listed, it had a different business model altogether. For a long period it was a content-supplier making fixed revenues. After its IPO, it attempted to be a multi-channel broadcasting company. Its IPO was over-subscribed 17 times and NDTV collected Rs110 crore offloading about 25% stake to the public. In the first year of its existence as a listed company NDTV posted a net loss of Rs50 crore (FY2004) and has been limping along all these years. It just doesn't seem to, does it? Well, here is a simple fact. The stock got listed on 19th May 2004. At the end of that day the stock price was Rs99. More than six years later, the price is Rs105.
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam