Following the news from media reports of the Prime Minister’s Office (PMO) finding merit in the Ministry of Home Affairs (MHA) argument for denying the 33 channels of Sun TV Network security clearance the shares of the dropped instantly on Tuesday morning. Although the final judgement on this issue by the PMO will be made after the arrival of I&B Minister ArunJaitley on June 25 back to the country, Sun TV Network shares fell by over 6% as markets opened in the morning. The stocks dropped as low as 22 points to touch a low of 311 points from the previous day’s closing of 333 points. It however managed to recover a little and marginally stabilise to close 3.41% down at Rs.321.95.
This came as disappointing news to the network which had just managed to rebound with a 10% rise on Friday, June 19 after the Attorney General (AG), MukulRohatgi’s opinion on the issue lent support to Sun TV Network. The AG had said that alleged corruption cases against the promoters cannot be grounds for denying security clearance for the network. He further said that denial of security clearance to Sun TV citing ‘economic security’ was not legally tenable.
The Sun TV network has been facing a rollercoaster ride recently in the stock markets which all started on June 8 as soon as the denial of security clearance to the network became public. As media reports emerged regarding the network which had applied for the renewal of its license for the next 10 years with the Ministry of Information & Broadcast (MIB) but was denied the security clearance for the same by the MHA, the stocks of crashed by nearly 28% in the morning to recover little and end the day down 25%. It even managed to breach its 52-week low of Rs.258 before recovering.
At that time international brokerage company Credit Suisse downgraded Sun TV’s ratings to neutral from outperformer with a reduced target price of Rs.290 from Rs.450 per share. This is the same with today’s fall in shares of the company as many brokerages and stock analysts gave a sell call for the network’s stocks. ChandanTaparia of Anand Rathi Securities in a media report shared his view that for one to sell Sun TV shares for a target of Rs.295. This spells danger for the network’s stocks. It was reported earlier that nearly Rs.3,900 crore worth of investment was eroded following the crash of the stocks the first time on June 8.
The denial of the security clearance by the MHA is on the basis of three cases of corruption and criminal activities which are lodged on the promoters i.e. the Maran brothers. However, the MIB had asked the MHA to review its decision and had also asked for further clarification on the denial of security clearance. The MIB also sought out the legal counsel of the AG after the MHA had stood by its decision. The only option now for the network would be to approach the court to seek for relief on the issue. If the decision by the PMO on June 25 is favouring the MHA’s decision we could once more see a drop. However, if the network does receive a positive decision from the court in the near future the stock could see a rebound.