Videocon spurts on reports of stake sale

NetScribes/Ganesh Ramamoorthy

The Videocon International counter witnessed hectic activity at the Bombay Stock Exchange (BSE) on Tuesday, following reports that a foreign company planned to pick up a stake in the company. Over 417,000 shares changed hands at the counter in the first half hour of trading.

Marketmen attribute the spurt in volume to reports that the Hong Kong-based Hutchison Whampoa group is picking up a 15 per cent stake in the company.

Opening from the previous close of Rs 54.80, the scrip hit the 8 per cent upper limit to touch the day's high of Rs 59.15, before closing at Rs 58.25 - up Rs 3.45 or 6.30 per cent. A total of 1.41 million shares were traded during the day at the BSE.

The share, which started its rise about a month ago, touched Rs 59 levels on Tuesday, up Rs 19.80 from the August 11 level of Rs 39.20 and off Rs 44.50 from the 52-week high of Rs 103.50.

Hutchison Whampoa is reportedly looking at a 15-20 per cent stake in Videocon. While the price at which the deal will be struck is not yet known, analysts say that once Hutchison picks up the 15 per cent stake, the Videocon promoters' (the Dhoot family) stake would come down to 38.4 per cent from the current 45 per cent.

Reports suggest that Hutchison plans to pick up the stake on the expanded equity base of Videocon, which will issue fresh equity shares on a preferential allotment basis, subject to approval from the institutions.

"The move will benefit Videocon very much as it will transform the company from being a strict hardware manufacturer to a broadband services provider," says an analyst with a Bombay-based securities firm.

Videocon, which plans to become a full convergence company, has firmed up major Internet initiatives spanning a range of products, applications, content and access. "The plan also includes getting into voice over Internet protocol (VoIP), which is where the Hutchison group's interests lie," says the analyst. He adds that the equity participation from Hutchison will be used to part-finance the project.

The company is also targeting the home users with a new proprietary technology - television application protocol (TAP) - to enable viewers to surf the Worldwide Web even as they are watching television. This is an advancement over Web-TV.

TAP, which is to be launched by September-end, will be provided by US-based Telecruz Technologies. Videocon, through its infotech division, has already invested $10 million to develop TAP at its development centre in San Jose, California.

The company has also set up its own horizontal portal, hellovil.com, which will be the default home page for its ISP business. Videocon is planning alliances with cable operators across the country for Internet access and hopes to reach 2 million users by 2002.

The cost of the first phase of the project is estimated at Rs 3-4 billion. Videocon has already completed trial-runs for Web-enabled TVs. The company is now building infrastructure for its dial-up Internet service, which is proposed to be offered in 85 cities. Videocon is looking at a turnover of Rs 80 billion by 2003 and Rs 200 billion by 2007.

Money

Market Impact

Tell us what you think of this feature