The shares of New Delhi Television Ltd (NDTV) hit the upper circuit on Wednesday with an over 20 percent rally after Adani Group, which recently established a media arm, announced that it would pick up 29.18 percent stake in company and make an open offer to acquire 26 percent more.
NDTV shares have been upbeat on rumours of this deal for over a year now. Today's gains take the rally to 393 percent over the last one year.
Karan Taurani, SVP-Research Analyst, Elara Securities, told CNBC TV-18 that he believes this is an expensive acquisition, given that it is happening at 3.5 times sales.
Moreover, a lot of eyeball shifting to OTT has happened in another genre but not in the news genre which, according to him, makes NDTV a hot pie for Adani.
So, what should you do at this juncture: buy, sell or hold the stock? Additionally, does it make sense to tender your shares in the open offer?
Market experts are currently tight-lipped on the stock’s future moves for two reasons. One, very few analysts have a coverage on NDTV and, two, unpredictable nature of Adani Group stocks make it difficult for them to comment.
A head of research at a leading Mumbai-based broking firm said the stock could face downward price pressure as the impact of buy on rumours and sell on news kicks in. He believes short-term investors should sell the shares now.
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“For long-term investors, Adani is making big moves in the media industry. Apart from NDTV, the Group has picked up 49 percent stake in BloombergQuint’s publisher. This may bring in some synergy. So, they can keep holding if they have the ability to take risks,” he said, adding those with low tolerance for risks should avoid it.
Taurani also believes the price of NDTV shares will rationalise and move southward as the current valuation is not justifiable.
Will the open offer succeed?
Another puzzling question for market participants is that Adani Group has priced the open offer at Rs 294 per share, which is at a 20 percent discount to the last closing price of Rs 366. This, many believe, may not encourage retail investors to tender shares in the issue.
“They could have priced it higher to make the offer more attractive,” said the above-mentioned analyst. He doubted that the issue may be successful, especially given founders Pranav Roy and Radika Roy have opposed the takeover.
"The NDTV founders and the company would like to make it clear that this exercise of rights by VCPL was executed without any input from, conversation with, or consent of the NDTV founders who, like NDTV, have been made aware of this exercise of rights only today. As recently as yesterday, NDTV had informed the stock exchanges that there was no change in the shareholding of its founders," NDTV said in a regulatory filing.
Both founders hold 32.26 percent stake in the firm. Adani Group has indirectly acquired 29.18 percent held by another promoter RRPR Holding Private Limited. This means the Adani Group will have to buy 26 percent of 38.55 percent held by public investors.
Another head of research at a broking firm said the lower pricing of the open offer could mean Adani Group has already struck a deal with other investors and are confident that the open offer will succeed.
Among other big public investors in NDTV are LTS Investment Fund Limited that hold 9.75 percent and Vikasa India EIF I Fund that holds 4.42 percent. Together they hold 14.17 percent stake.
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