Subscribe to Network18 rights issue, says SMC

Brokerage house SMC has advised its clients to subscribe to the rights issue of Network 18 Media & Investments, saying it was "reasonably priced."

SMC has assigned a three-and-a-half star rating out of a maximum five, to   Network18, citing digitization, value unlocking in online firms BookmyShow and Homeshop18, and leadership position of its business and general entertainment news channels as the key positive.

"Repayment of debt using rights issue proceeds would make the company virtually debt free company. This will substantially reduce the interest expenses leading to better profitability," the SMC report says.

"Digitization of the Indian television industry will help to reduce the under-reporting of subscribers by local cable operators and will enable the company to further increase its subscription revenue. The unlocking of value of BookmyShow and Homeshop18 can offer huge future potential. Leadership position of CNBC-TV18, CNN-IBN, IBN-7, Colors and others gives healthy premium in ad rates to the group. This can be expected to continue in the foreseeable future," the report says.

"Considering the future growth prospects, we expect the price of rights issue is reasonable. Also this offer presents good opportunity to the existing shareholders to buy large quantity of shares considering the rights issue ratio of 307:50," the note says.

On Thursday, Network18 shares closed flat at Rs 28.60 a piece. 

Read full report here: Network18, TV18 okays rights issue at Rs 30/sh, Rs 20/sh

Disclosure: Moneycontrol is part of the Network18 group.