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BSE   20 Nov 17 | 12:00 AM

1006.65 1.35 (0.13%)
Mkt Price (Rs)   Chg Rs (Chg %)
Code: 500084
Face Value: N.A.

NSE   20 Nov 17 | 12:00 AM

1006.80 2.15 (0.21%)
Mkt Price (Rs)   Chg Rs (Chg %)
Code: CESC
Performance
1 Week : Rs 1,026.45 (-1.93%)
1 Month : Rs 1,031.10 (-2.37%)
1 Year : Rs 579.80 (73.62%)
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Street worried about CESC's IPL innings

Ujjval Jauhari / New Delhi 11 Dec 15 | 06:21 AM

News of CESC’s subsidiary bagging rights to the Pune Indian Premier League team has not gone down well with the Street. The stock has lost about seven per cent in the last three trading sessions. CESC had informed BSE that New Rising Promoters, a subsidiary, had won the bid floated by the BCCI for acquiring the rights and obligations to operate Pune franchise of IPL for two years.

The Street is worried that outgo could go up to Rs 100 crore per annum (franchisee fees and players remunerations) and that the company is venturing into unrelated businesses. Also, investments by most companies in the cricketing league have not been profitable for investors. Earlier, the power utility major had ventured into information technology, retail, cafes, and music among others. ALSO

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Further, New Rising Promoters, the company through which CESC has acquired bid for IPL, is a subsidiary of another subsidiary company that is unlisted. This complex structure has added to concerns and intent of promoters on such a purchase. Analysts at Sharekhan say it is not prudent in the first place to bid for an IPL team through a step-down subsidiary of the listed entity.

The company has clarified there will be no financial outgo from CESC or any of the listed firms towards the IPL franchise. There were reports that another group company, Philips Carbon, would infuse cash if required for the venture. Due to this, Philip Carbon’s share prices declined about nine per cent in the past three sessions. Also CESC at least would have to provide a bank guarantee for the transaction.

ALSO READ: Why IPL is bad for shareholders

Murtaza Arsiwala at Kotak Institutional Equities says costs would be Rs 100 crore per annum and if CESC were to part-fund it let us say its share is Rs 50 crore, this will imply an impact of Rs 3.8 a share; revenues would absorb part of expenses, if not all.

The company had bid for IPL franchise through reverse auction bidding and will pay an annual fee of Rs 16 crore. Besides, there is a cap of Rs 66 crore on players’ salaries. Post the event, while Sharekhan has revised down target price to Rs 580, Kotak has a target price of Rs 620 for the stock, which is trading at Rs 513.85.

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