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New clause about accuracy of valuation added after Sebi observations
TV18 Broadcast, which is headed for a rights issue, has added a new 'risk factor' in its letter of offer filed with regulators. The company plans to raise about Rs 2,700 crore by issuing about 1.35 billion shares at Rs 18 each. The issue opens on September 25.
TV18 plans to use Rs 1,925 crore of the proceeds from the issue to finance the acquisition of a few ETV channels.
In the new risk factor, TV18 indicated there was “no assurance” the valuation was “accurate.” In its letter of intent, it stated, “The valuation of ETV companies, which have undergone significant restructuring in the past five years, is based on financial information derived from the unaudited balance sheet of ETV companies, as on September 30, 2011 (the last available balance sheet as on the date of completion of the valuation) and on projections of the business provided to it by the managements of TV18 and ETV companies.”
The risk factor wasn't included in the draft offer document filed by the two firms in March. In an emailed response, a TV18 spokesperson stated, “We cannot comment on the regulator’s comments during the review process. However, from a disclosure perspective and to comply with applicable Sebi (Securities and Exchange Board of India) regulations, it is the company’s obligation to inform investors of possible risks in relation to investing in the rights issues and the accompanying transactions, and to ensure investors make informed investment decisions.”
In the letter of offer, the company added the valuation was based on an estimate by global advisory firm Ernst & Young. “In connection with the ETV acquisition, we and Network18 have entered into the SPA with Equator and Arimas, pursuant to which Arimas shall sell and transfer Equator securities to us for an aggregate consideration of Rs 1,925 crore, as adjusted for the net debt,” it stated.
Equator holds 99.96 per cent in Panorama (which owns ETV news channels), 49.98 per cent in Prism (which owns ETV non-Telugu channels) and 24.50 per cent in Eenadu (which owns ETV Telugu channels). To arrive at the valuation, the little known companies have been valued at Rs 467.6 crore, Rs 1,881.2 crore and Rs 2,076.8 crore, respectively.
In the risk factor, the company stated there was no assurance the valuation by Ernst & Young represented an accurate valuation of the ETV companies. “And, we cannot provide any assurance that our investment in the ETV companies will be beneficial to the company and/or our equity shareholders and provide returns on a continuous basis.”
Companies headed for a public issue have to disclose all business and systemic risks faced by them to potential investors. A similar risk factor has been added by Network 18 Media and Investments, which is also raising Rs 2,700 crore through a rights issue of about 900 million shares.
While the risk factors stated the ETV acquisition was approved by the company’s management on the basis of the valuation by Ernst & Young, the advisory firm says for projections on synergies, it relied on the management, since it did not have the requisite ‘technical expertise’.
“The management of TV18 informed Ernst & Young of the synergy benefits of the combined entity after the ETV acquisition in subscription revenues, advertisement revenues and savings in carriage/placement charges paid. Ernst & Young has discussed the aforesaid synergies with the management of ETV and their view was in line with the assumptions considered for the synergies. In this connection, Ernst & Young has stated it does not have the technical knowledge/expertise to validate the assumptions relating to the synergy benefits. Ernst & Young has also stated its valuation analysis is based solely on various financial information provided by the management of TV18 and ETV companies, without verifying the original documents.”
Via
TV18 Broadcast, which is headed for a rights issue, has added a new 'risk factor' in its letter of offer filed with regulators. The company plans to raise about Rs 2,700 crore by issuing about 1.35 billion shares at Rs 18 each. The issue opens on September 25.
TV18 plans to use Rs 1,925 crore of the proceeds from the issue to finance the acquisition of a few ETV channels.
In the new risk factor, TV18 indicated there was “no assurance” the valuation was “accurate.” In its letter of intent, it stated, “The valuation of ETV companies, which have undergone significant restructuring in the past five years, is based on financial information derived from the unaudited balance sheet of ETV companies, as on September 30, 2011 (the last available balance sheet as on the date of completion of the valuation) and on projections of the business provided to it by the managements of TV18 and ETV companies.”
The risk factor wasn't included in the draft offer document filed by the two firms in March. In an emailed response, a TV18 spokesperson stated, “We cannot comment on the regulator’s comments during the review process. However, from a disclosure perspective and to comply with applicable Sebi (Securities and Exchange Board of India) regulations, it is the company’s obligation to inform investors of possible risks in relation to investing in the rights issues and the accompanying transactions, and to ensure investors make informed investment decisions.”
In the letter of offer, the company added the valuation was based on an estimate by global advisory firm Ernst & Young. “In connection with the ETV acquisition, we and Network18 have entered into the SPA with Equator and Arimas, pursuant to which Arimas shall sell and transfer Equator securities to us for an aggregate consideration of Rs 1,925 crore, as adjusted for the net debt,” it stated.
Equator holds 99.96 per cent in Panorama (which owns ETV news channels), 49.98 per cent in Prism (which owns ETV non-Telugu channels) and 24.50 per cent in Eenadu (which owns ETV Telugu channels). To arrive at the valuation, the little known companies have been valued at Rs 467.6 crore, Rs 1,881.2 crore and Rs 2,076.8 crore, respectively.
In the risk factor, the company stated there was no assurance the valuation by Ernst & Young represented an accurate valuation of the ETV companies. “And, we cannot provide any assurance that our investment in the ETV companies will be beneficial to the company and/or our equity shareholders and provide returns on a continuous basis.”
Companies headed for a public issue have to disclose all business and systemic risks faced by them to potential investors. A similar risk factor has been added by Network 18 Media and Investments, which is also raising Rs 2,700 crore through a rights issue of about 900 million shares.
While the risk factors stated the ETV acquisition was approved by the company’s management on the basis of the valuation by Ernst & Young, the advisory firm says for projections on synergies, it relied on the management, since it did not have the requisite ‘technical expertise’.
“The management of TV18 informed Ernst & Young of the synergy benefits of the combined entity after the ETV acquisition in subscription revenues, advertisement revenues and savings in carriage/placement charges paid. Ernst & Young has discussed the aforesaid synergies with the management of ETV and their view was in line with the assumptions considered for the synergies. In this connection, Ernst & Young has stated it does not have the technical knowledge/expertise to validate the assumptions relating to the synergy benefits. Ernst & Young has also stated its valuation analysis is based solely on various financial information provided by the management of TV18 and ETV companies, without verifying the original documents.”
Via
