ShareKhan Newsletter Blog

Slide in stock, concerns overdone

The Television Eighteen (TV18) stock has witnessed a slide in the past month. We believe the downslide has got to do more with market sentiment rather than any weakening of the company's fundamentals, though macro risks of an overall slowdown in business activity cannot be negated. We believe the following factors have led to a correction in the price of the stock.

• An overall correction in the stock market.
• The dependence of CNBC and Awaaz for their advertising revenues on the financial services business a significant portion of which comes from market participants.
• A substantial portion of Web18's revenues comes from subscription-based portals such as moneycontrol.com, poweryourtrade.com and commoditiescontrol.com. A slowdown in stock market activity is perceived to directly affect the growth of these businesses.
• The growth of the relatively new business of Newswire18 depends to a large extent on the mood of stock market participants.
• The postponement of Web18's listing and the consequent unlocking of value for TV18's shareholders, which was perceived to be a trigger.

Export duty scrapped 
The Government of India has scrapped the export levy on pipes and tubes, which was imposed last month. The move, taken last month in an endeavour to cool down inflation, took the industry by storm. As the bulk of the order book of pipe makers comprises of export orders, the move would have led to a significant margin erosion for the industry and would have also reduced the competitiveness of domestic players vis-à-vis other international players. The market too reflected this concern, as the stocks of the pipe making companies corrected by almost 10-15% over the last one month, as the entire sector witnessed a considerable de-rating. We believe the withdrawal of the export levy would act as a significant booster for the sector and the sector should go back tracking the fundamentals as the concerns relating to government intervention are done away with. 

Large cars and UVs—hit by double whammy
The government has increased the excise duty on large cars and utility vehicles (UVs) with engine capacity greater than 1,500cc. It has imposed an additional specific duty of Rs15,000 on large cars (large cars are defined as those with length greater than 3.8 metre; and engine size greater than 1,200cc for petrol run cars and greater than 1,500cc for diesel run cars) and UVs having engine capacity larger than 1,500cc. On UVs having engine capacity greater than 2,000cc a specific duty of Rs20,000 has been levied. With these measures the government is seeking to discourage the sales of vehicles with higher fuel consumption in light of the persistently sky-rocketing fuel prices.