BUSINESS
Nimbus Communications, the loss-making broadcaster, will try its luck with an IPO yet again, even as market conditions have turned volatile following a slew of scams related to corporate governance.
Nimbus Communications, the loss-making broadcaster, will try its luck with an IPO yet again, even as market conditions have turned volatile following a slew of scams related to corporate governance.
The company, which has defaulted on payments of Rs225 crore to Punjab National Bank, operates sports channels such as Neo Sports and Neo Cricket and has been trying to tap primary markets for the last few years to raise funds for its expansion plans.
It filed a draft red herring prospectus on September 30, 2010 with the Securities and Exchange Board of India (Sebi) to raise close to Rs900 crore by issuing 220.5 lakh shares.
Media reports have said the company had planned IPOs in 2008 and 2009, but this could not be confirmed, nor are there any prospectus filings.
Harish Kanayalal Thawani, the promoter of Nimbus, could not be reached.
The issue would see 80.10 lakh shares being sold by some of the corporate investors such as Americorp Ventures Ltd, CSI BD (Mauritius) and Funderburk Enterprises Ltd. The promoters and 3i Sports would not sell any of their holdings.
However, the company faces major hurdles in business.
On a consolidated basis, Nimbus has been consistently making incremental losses and has negative operating cash flows.
It incurred losses of Rs35.3 crore, Rs79.71 crore, Rs108.2 crore, Rs131.71 crore and Rs142.39 crore in the fiscal years 2006 to 2010, respectively, according to the prospectus.
And, as it engages in expansion would not be able to turn profitable anytime soon due to additional capital to be deployed in growing its businesses.
Nimbus intends to utilise a total of Rs350 crore raised towards expansion with Rs129.1 crore earmarked for launching two new entertainment channels for which it has not yet received the regulatory approval. This would impact its growth in broadcasting business.
The company has a high debt burden of around Rs579 crore as of March 31, 2010, a chunk of which is secured loans of Rs331.65 crore.
High interest rates of approximately 11%-12% may lead to huge outgo as interest expenses in future.
Further, Nimbus recently failed to fulfill its loan repayment commitments to a clutch of banks through which it has raised the bank guarantee of `2,000 crore for acquiring new media rights licenses from the Board of Cricket Control in India for April 2011 to March 2014 for all international matches organised by board in India.
The promoters of the company — Harish Kanayalal Thawani, Shobha Harish Thawani and Paramount — have also pledged a part of their equity to these banks.
Nimbus has defaulted on repayment of a short-term loan of Rs225 crore provided by Punjab National Bank, which was due for repayment in full on June 30, 2010.
The company got an extension from PNB to pay outstanding of Rs140 crore till December 23, 2010.
Also the bank has not been able to pay the margin money of Rs60 crore to PNB and Union Bank of India, which was due by April 2010.
This lapse or default in repaying debt raises concerns regarding its financial position and this may act against the company in bidding for new sports and broadcasting rights, the company warned in its prospectus.
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