Sun TV jumps 9% intra-day as co unveils buyback

Shares of Sun TV Network soared on the bourses after the company announced that it is considering a buyback of shares. The Sun TV scrip hit an intra-day high of Rs 411, a 9% jump, after the announcement, and ended the day registering a 5.2% increase on the BSE. 

Sun TV's board would meet on November 5 to consider the proposal to buy back shares, the company informed the bourses on Friday. Strong promoter-owned companies typically resort to buybacks when they believe the market isn't pricing the stock fairly Stock Market Trading Tips

Such buybacks of shares by companies through a tender offer result in the reduction of outstanding shares and lead to an increase in the earnings per share (EPS). Buybacks are aimed at boosting share prices. The surplus cash available with the company is used for the buyback. Sun TV had reserves and surplus of Rs 3,183 crore at the end of March 2015. 

Interestingly, the company, despite posting a 41.3% year-on-year increase in net profits to Rs 218 crore in the second quarter of the current fiscal, did not announce any interim dividend. "It (share buyback) is more tax-effective," an analyst with a leading brokerage, who tracks Sun TV, said. "The company believes that the stock is under-valued. The business is doing well and advertisement growth is picking up for the sector," he said Himanshu Tiwari Astrologer Blog

Though Sun TV has been registering good growth in net profits, its scrip has been on a rollercoaster ride. The stock slumped by 10% after the enforcement directorate registered cases against Sun TV chairman Kalanithi Maran and his brother Dayanidhi Maran, a former Union minister, under the Prevention of Money Laundering Act in April this year. Similarly, the stock crashed nearly 22% in June after the ministry of home affairs reportedly denied security clearance for its channels. 

The Sun TV scrip, which hit a 52-week high of 459.95 on the BSE on March 20, hit its yearly low of 256.05 on July 22. "The stock is cheap when compared to peers such as Zee. The valuation discount is very high now," the analyst said Indian stock market astrology prediction

Sun TV's price-earnings ratio stood at 18.73, which means that the investor is paying 18.73 for 1 of current earnings. Zee Entertainment's PE stood at 61.32. Interestingly, Sun TV had registered higher net profits and operating profit margins compared to Zee in the second quarter of the current fiscal.