Sun TV is a Political Share – Do Not Buy it Now
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Powerful political connections
Sun TV is run by Kalanithi Maran, elder brother of the former Central Minister Dayanithi Maran. The Maran brothers are the sons of Late Murasoli Maran who was the former Tamil Nadu Chief Minister M Karunanidhi’s nephew. Because of this political clout, Sun TV was built and flourished. Karunanidhi and his party DMK tasted defeat in the Assembly elections held in April (results declared in May). The DMK failed to secure enough seats to even become the opposition party in the State Assembly. Jayalalithaa became the Chief Minister of Tamil Nadu because of the landslide victory of her party AIADMK. Ever since Jayalalithaa became the Chief Minister, the fortunes of Sun TV are on the decline which is reflected by the decline in its share price.
Jayalalithaa gives troubles
First of all, Jayalalithaa announced that the government of Tamil Nadu will run the cable TV business. She revived the already defunct Arasu Cable Corporation and is spreading its business to all the corners of Tamil Nadu with vigour. Arasu Cable is expected to pose a stiff challenge to Sun TV. But the popular channel Sun TV itself is not listed in Arasu Cable as Kalanithi Maran is refusing to part with the license to the government. Without Sun TV channel, Arasu Cable will not register progress very much. Secondly, Dayanithi Maran was forced to resign from his minister post because of a telecom scandal involving the former owner of Aircel Sivasankaran. The DMK and its President Karunanidhi are unable to wield any political influence in the changed atmosphere with Jayalalithaa firmly in control of Tamil Nadu State and the Central government not considering any of the DMK’s requests like the release of Kanimozhi from Tihar jail (now she has been released after spending time in jail for six months). Because of these political developments, Sun TV is on a sticky wicket.
Puthiya Thalaimurai news channel pips out Sun News
One more shock that Sun TV got recently is that Puthiya Thalaimurai (New Generation), a newly opened channel, has dislodged Sun News channel from the number one slot. 38 years old P. Sathyanarayan’s new Tamil television news channel has achieved the impossible of dislodging Sun TV’s premier status in news. This is the first time Sun TV has fallen from the leadership status in any of the categories. Sun TV is more than eleven years old whereas Puthia Thalaimurai started just over two months back. In the last week of the month of October, Puthia Thalaimurai news channel accounted for 29.6% of the total viewership whereas Sun TV could account for only 25.1% in its Sun News channel. Just before launching of Puthia Thalaimurai news channel, Sun TV enjoyed 55% of the total viewership in news channels.
Sun News presents one sided view
What is the reason for the downgradation of the Sun TV in news channels? Sun TV presents only one side of the news. Sun TV is run by the DMK leaders. It presents only such news that is favourable to the DMK and the ruling Congress at the centre. It blacks out any adverse news. But a neutral channel like Puthia Thalaimurai does not have any compulsions to black out any news. Therefore it is receiving increasing support from the viewers. Till the arrival of Puthia Thalaimurai news channel, people in Tamil Nadu were left with the option of watching news channels sponsored or associated with political leaders. For example, Jaya TV was associated with Jayalalithaa and AIADMK, Sun TV with DMK, Kalaignar TV with DMK, Captain TV with DMDK of actor Vijayakanth, Makkal TV with PMK of Ramadoss, Mega TV with Congress Party and the list goes on. These channels presented only one sided news. For example Kalaignar TV never even announced the victory of AIADMK and Jayalalithaa when the Assembly election results were declared in May. Strictly speaking, Puthia Thalaimurai’s Sathyanarayanan is also not neutral and belongs to Democratic Party of India which his father started. But Democratic Party of India is so small and unpopular that the news channel cannot behave as a party tool. Sathyanarayan’s father T R Pachamuthu is the head of the renowned SRM group of educational institutions in Tamil Nadu. SRM University is very popular among the students. SRM group has about 20000 students in its rolls. Sathyanarayan is also the owner of a weekly magazine by the same name Puthia Thalaimurai which sells 1.5 lakh copies every week.
Sun TV is still the market leader among entertainment channels
But Sun TV is still at the top when it comes to entertainment programmes. One major concern for the company is the slowdown of the advertising revenue in the second quarter to 2% as against 4% growth in the first year when taken for year to year. This may be because of the slowdown of the media expenses by companies due to slowdown in the economy and corporate growth. For example, Hindustan Unilever’s advertising expenditure as a percentage of its revenue declined by 2% to 11.8% during Q2. Cable subscription revenue declined by 13% during Q2. As Arasu Cable spreads its wings, Q3 revenue through cable subscription may fall still further. But Sun TV is the largest regional broadcaster in South India and is the market leader in three of the four regional markets.
During Q2, Sun TV’s founder Kalanithi Maran was quizzed by the CBI. Kalanithi Maran has 77% stake in Sun TV, CBI investigations centre around the deal with the Maxis group Chief T Ananda Krishnan. The previous owner of Aircel Sivasankaran has alleged that he was forced to sell off his holding in Aircel to Maxis due to the threat by Dayanithi Maran, former Minister in the Central government. Another allegation against the brothers Kalanithi Maran and Dayanithi Maran is that they had been using BSNL lines free for Sun TV’s commercial telecom use. The AIADMK government headed by Jayalalithaa booked cases against Kalanithi Maran’s aide Hansraj Saxena on complaints of cheating by movie producers. After spending more than two months in jail, Saxena was recently granted bail. Now he has resigned from Sun TV,
CBI enquiry a mere drama
But investors in Sun TV should remember that the CBI raid and its quizzing Kalanithi Maran and Dayanithi Maran are mere drama. The allegations against Sun TV and the brothers are several years old. CBI kept quiet all these years and now suddenly has acted. In this long gap of time, the brothers could have easily destroyed evidence for all their activities. Moreover CBI functions under the Central government where DMK still wields power. Therefore nothing will happen to the brothers and Sun TV. Moreover Kalanithi Maran and Dayanithi Maran are very prosperous and powerful people. To illustrate this, the Tamil Nadu police summoned Kalanithi Maran for questioning. But Kalanithi Maran stated that he was going abroad and sought to postpone this questioning by the police after he returned from abroad. Can an ordinary person talk like this to the police? The police will forcibly take that person to the police station and question him. But Kalanithi Maran is not an ordinary man. Even Jayalalithaa’s police cannot touch him. They can only issue summons but not enforce it. Kalanithi Maran can also manage to get any case against him closed by his power. The brothers have influence right upto Sonia Gandhi and Rahul Gandhi, the real powers of India. Compared to the powers of Sonia Gandhi, Jayalalithaa’s powers are nothing to talk about.
Arasu Cable achieves 1.45 crore connections
Sun TV is still the top channel among the viewers in several segments. It has more than 60% viewers in the entertainment segment. Sun TV’s prime advertising rates for ten seconds duration is Rs.40000. Arasu Cable, activated by Jayalalithaa to pose competition to Sun TV claims that it has achieved 1.45 crore connections since activation in June. Arasu Cable offers 90 free channels for a monthly subscription of Rs.70.
Promoters hold 77% stake in the company
Sun TV has low floating stock. Promoters hold 77% of stake in the company. FIIs hold 13.48%, domestic institutional investors hold around 2% and the rest 7.5% is held by the public. Tata Sky poses a competition to Sun DTH. Other players like Airtel, Reliance and Videocon are not active in Chennai city and Tamil Nadu. Sun DTH charges Rs.1490 for ten months’ subscription. Tata Sky charges one time payment ranging from Rs.1199 to Rs.4000 plus monthly subscription. Number of cable connections in Chennai city is estimated to be around fourteen lakh. The number of Cable TV operators in Chennai city is around 2000. Total number of cable connections in Tamil Nadu State is around 1.2 crore. Sumangali Cable Vision (SCV) belongs to the Sun TV group. It gives free set top boxes to the subscribers for viewing paid channels.
Do not invest now
Kalanithi Maran has recently pledged 49.92 million shares of Sun TV. With this, the total percentage of shares he has pledged is 12.67%. Investors should not enter into the shares of Sun TV right now at the current ruling market price. This is because of the following reasons:
- Sun TV’s fortunes or misfortunes are shaped by politics first and business second
- Dayanithi Maran has lost his minister post and is facing CBI probe (of course this probe is just an eyewash)
- Kalanithi Maran is also facing probe by the Tamil Nadu State government
- The charges against the company and the brothers are serious in nature
- The brothers have lost all power and influence at the State level due to the coming to power by Jayalalithaa and her party AIADMK
- Being forced to resign from the central government, Dayanithi Maran and his brother have lost their clout with the central government
- The brothers are not in best of terms with Karunanidhi, the DMK chief
Karunanidhi will be the Chief Minister again in 2016
Sun TV will be the most sought after share in the year 2016 when Karunanidhi will become the Chief Minister of Tamil Nadu once again at the age of 92. So far, the people of Tamil Nadu have never voted Jayalalithaa back to power at any time. Going by the historical fact, it is quite clear that the Tamil Nadu voters would have already decided to vote for the DMK and return Karunanidhi to power in 2016. At that time, all the cases against the Sun TV, Kalanithi Maran, Dayanithi Maran, Karunanidhi and other DMK ministers will be withdrawn. That will be the best time to buy the shares of Sun TV. Till then, investors should wait and watch the dramas that unfold one after another.
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