FIIs halve exposure to entertainment stocks

MUMBAI: Foreign holdings in listed media companies such as Reliance Mediaworks and Den Networks have halved between June and September due to lack of visibility on new releases and business outlook that’s been floundering due to series of flops.

“For the whole media sector, profitability in the second half of FY12 will be lower compared with last year,” said Vikas Mantri, analyst at ICICI Securities. “The festive season has finished in the first half itself unlike before,” he said.

Investors in general have been lukewarm to cinema exhibitors in particular as they ventured into the risky business of film production. Furthermore, with the rising viewing of movies at homes the footfalls in movie halls have collapsed. High rentals has also affected their profitability. “Media stocks were quite hot a few years ago,” said Sreekanth PVS, analyst at Angel Broking.

“However, the media industry’s growth is known to be closely knit with GDP growth. With slowdown talks doing the rounds, there could be some loss of interest in the media sector.” JP Morgan recently sold off its stake in PVR Pictures, PVR’s production subsidiary.

“The response from the domestic investors has been very strong. FII holding has been replaced by domestic buyers,” said Nitin Sood, CFO of PVR in an email response.

While FII holding in PVR has come down to 2.54% from 7.17% quarter-on-quarter, in Reliance Mediaworks it has reduced sharply to 0.76% from 3.56%. In Den Networks, the Zee Group cable TV distributor, FII participation reduced to 7.28% from 12% quarter-on-quarter. Cinema had reported FII holding going from 5.2% in March quarter to 2.4% in the June quarter.