As political fortunes were sealed in Tamil Nadu on Thursday, stocks moved in tandem. Shares of Sun TV Network, promoted by Kalanithi Maran, grandnephew of Dravida Munnetra Kazhagam (DMK) president Kalaignar M. Karunanidhi, fell over 13 per cent to Rs. 370.9 on Thursday after the DMK faced defeat at the hands of All India Anna Dravida Munnetra Kazhagam (AIADMK) in the Tamil Nadu Assembly election. The fall eroded Rs. 2,232 crore of the company’s market capitalisation.
Sun TV’s rival Raj TV Network, another Chennai-based company, saw its shares soar 20 per cent to hit the upper ceiling at Rs. 73.65 on Thursday, adding over Rs. 63 crore to its market capitalisation in a weak Mumbai market. The BSE Sensex fell 304.89 points or 1.19 per cent to 25,399.72 points.
Only on Tuesday, Sun TV shares jumped 11 per cent with most exit polls predicting a win for the DMK in the Assembly election.
Sun TV enjoyed robust advertisement growth during the DMK rule between 2006 and 2011. This, however, has fallen below industry standards during the past five years of AIADMK rule.
During FY11, when the DMK was in power, Sun TV witnessed growth in advertisement revenues to 23 per cent, which sank into negative territory in FY12 with J. Jayalalithaa becoming the State Chief Minister. Thereafter, Sun TV’s advertisement revenues growth never touched double digits except in FY13 when it posted advertisement growth of 11 per cent.
According to IIFL analysts, Sun TV shares trade at a discount to those of its rivals such as Zee TV. It might continue to trade at a discount due to investigations against the promoters, besides slower ad revenue growth. “The company has maintained its leadership position in Tamil Nadu despite the change in regime in 2011. The weakness in ad revenue growth is due to loss of viewership share in non-Tamil markets,” said IIFL in a note to clients on Wednesday.
