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S. Vaidya Nathan

SHAREHOLDERS of Padmalaya Telefilms can use the ongoing open offer at Rs 148.5 per share to cut exposures in the company.

The price appears attractive given the fundamentals and valuation levels commanded by the Padmalaya stock.

At the offer price of Rs 148.5, the share trades at around ten times its earnings. The offer price for the partly paid share of Rs 5 each is Rs 98 per share.

Given the risks in the media sector stocks, this appears to be an attractive valuation shareholders can capitalise upon.

The open offer is being made by Padmalaya Enterprises Private Ltd (using a loan given by Zee Teleflms) and Zee Telefilms.

Zee holds 63.3 per cent of the private company and the other promoters of Padamalaya Telefilsm hold the rest.

Padmalaya Enterprises had picked up equity in Padmalaya Telefilms through a preferential offer at Rs 142.2 per share.

With funds coming from Zee Telefilms, this has led to the open offer.

Padmalaya Telefilms programmes content for television channels and is broadly a player in the entertainment industry.

Its performance has grown steadily. But even on the fundamentals, the offer price is attractive.

There are numerous uncertainties on what would happen to the company once it comes under the Zee fold.

There are indications in the offer document that the animation business of the two would be integrated.

Both companies are broadly engaged in similar business.

But any such restructuring exercise would raise issues of how ownership claims are distributed.

The Zee group has in the past shown a tendency to keep changing key restructuring plans or their terms frequently.

Should there be a merger with Zee or an integration of the animation business, the swap ratio for ownership claims may not necessarily be in favour of Padmalaya Telefilms' shareholders.

In this backdrop, offer may be accepted. The offer size covers 23.86 per cent of the equity or 25 lakh shares on an equity base of 105 lakh shares (Rs 10.5 crore).

The offer opened on May 7 and closes on June 5. The merchant banker is Enam Securities.

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