Pentamedia Net hive off plan good: Analysts

MUMBAI: The plan by Indian multimedia software firm Pentamedia Graphics to

hive off its Internet broadcasting venture Numtv.com will help the company in

the longer term, analysts said.

"A lot of investment has gone into Numtv and it has been a drag on

Pentamedia's balance sheet, so hiving it off and letting it grow separately is a

good idea," said Sanjeev Kapoor, analyst with First Global Stockbroking.

The firm said on Thursday it would seek shareholder approval on December 15

to hive off the Net broadcast division which started operations a year ago,

citing the need for Numtv to be more focused and to attract overseas investment.

It also said it planned to make acquisitions of digital assets and businesses

of overseas companies and that it was exploring possibilities in at least 10

companies.

Pentamedia posted a 42.3 per cent rise in net profit for the six months ended

September 30, but profits were lower than expected because of a Rs 200 million

provision it made in the second quarter for copyright and Web-related risks in

Numtv.com.

The Net broadcast venture gives 30 channels including offerings from prime

television channels and has over 200,000 registered users.

Pentamedia said it would hold shares in the new entity as a consideration for

the business transfer, which is worrying some analysts.

"The company has pumped in some $14 million in this division already,

they should get something out of it, perhaps some arrangement for royalties and

not just dividends as a shareholder," said P Sridhar, analyst with the

Chennai-based Cholamandalam Securities.

"If they just intend to hold shares, it will probably have a negative

impact," he said.

Pentamedia shares ended Rs 2.85 up at Rs 353.35 at the Bombay exchange while

the benchmark index closed 0.41 per cent up at 3,868.34. It has lost 56 per cent

in the past five months and is off 75 per cent since December.

Overseas acquisition plan, a plus



Pentamedia's overseas acquisition plans are viewed positively by analysts who
believe the firm is technically sound, but needs a global marketing presence.

It is already a leading sub-contractor for Hollywood animation movies.

"They are mainly looking for a reach abroad because that's were the

movies and animation business is really big ... the market is not here, it is

out there," First Global's Kapoor said.

Pentamedia recently announced the acquisition of a majority stake in US-based

Film Roman, an animation producer, for $15 million.

Analysts expect the new acquisitions will not be very big.

Pentamedia is also seeking shareholder approval to raise funds by way of an

American Depositary Receipt or Global Depositary Receipt offering of up to $250

million with a greenshoe option of 15 per cent.

(C) Reuters Limited 2000.