Oberoi Realty takes Centaur hotel litigation to high court

Having lost the arbitration proceedings related to acquisition of Centaur hotel at Juhu (Mumbai), Oberoi Realty managing director Vikas Oberoi is set to challenge the decision in high court.

The Oberoi Realty management in a company announcement filed with the Bombay Stock Exchange (BSE) said that Siddhivinayak Realties P Ltd (SRPL) has filed an arbitration petition in the high court of Jurisdication at Bombay, seeking an injuction against V Hotels. Simultaneously, the joint venture firm is reviewing the matter and will pursue legal recourse / remedies as may be available, in consultation with its legal counsel.

A company spokesperson, when contacted, refrained to comment on the subject.

Oberoi Realty's wholly owned subsidiary company Oberoi Construction Ltd is a 50% joint venture partner in SRPL. Among other shareholders in the company include Shahid Balwa (promoter of 2G scam-tainted realty company DB Realty Ltd) and Vinod Goenka (promoter and managing director of DB Realty Ltd) who own 49.5% in the company.

Industry experts are of the opinion that Oberoi Realty will not give up on this asset so easily and that the realtor will pursue the matter irrespective of how much it takes the company to bring this asset into their portfolio. “The site is a very strategic in terms of location and knowing Vikas' approach to business, he would never let go off the opportunity to own this project. I think they would probably keep the site under litigation for as long as possible thus refraining the current asset owning company (V Hotels) from undertaking any development activity,” said an source familiar with the development.

In March 2005, SRPL had entered into an agreement with V Hotels Ltd (which acquired the said property for Rs 153 crore as part of BJP government's disinvestment process) for purchase of the Centaur hotel for Rs 387.5 crore. Citing irregularities in the deal, a CBI inquiry was initiated and the deal eventually went under arbitration following a dispute between the parties.

The latest arbitration ruling has terminated the agreement between V Hotels and SRPL directing the asset owning company to refund Rs 73 crore against around Rs 75 crore paid by SRPL till date. The refund will have to be made by V Hotels within 90 days of the ruiling i.e. by October 12, 2011.

Analysts tracking Oberoi Realty have valued the company's 50% stake in the project at 1x book value of investment. “We see minimal impact of the ruling on our valuation and maintain 'buy' on the stock with a target price of Rs 288 per share,” said Aashiesh Agarwaal and Adhidev Chattopadhyay, analysts with Edelweiss Capital in their report.

On Tuesday, the Oberoi Realty stock had reached an intra-day high of Rs 245 and closed at Rs 234.5 – down 0.21% as against the previous day's closing price of Rs 235.

Centaur hotel Juhu is owned by V Hotels wherein BSE-listed Tulip Star Hotels Ltd holds 50% stake and the balance is owned by Tulip Hotels Pvt Ltd. The latter (Tulip Hotels) is promoted by Ajit Baburao Kerkar the erstwhile chairman and managing director of The Indian Hotels Co Ltd (IHCL) popularly known as Taj Group of hotels.

BSE-listed travel company Cox & Kings Ltd with Peter Kerkar (Ajit Kerkar's son) at the helm of the affairs owns 32% stake in Tulip Star Hotels Ltd (the listed entity) in addition to a Rs 18 crore exposrue in the form of fully convertible deventures (FCD) – a type of debt security convertible into equity shares at the issuer's notice.

When inquired about the impact, this development would have on C&K's business, the company spokesperson said that the topic under discussion has nothing to do with the travel company and that it will have to be sorted out between V Hotels and SRPL.

By the end of trading session on Tuesday, shares of Cox & Kings had reached an intra-day high of Rs 221.5 closing at Rs 205.95 as against its previous close of Rs 192.9 – up by 6.77%.

Will Zaveri Bazaar move to Surat?

This news story first appeared in DNA edition on Saturday July 16, 2011.

It might be premature to say the country’s financial capital will have to part with diamonds but three blasts in Zaveri Bazaar, the diamond trading hub, and better infrastructure in Surat might change the traders’ hearts.

Mehul Choksi, chairman and managing director of the Geetanjali Group, admitted that Surat has the potential. Gujarat is already processing all the country’s diamonds “but it would be little too early to say it might turn into a hub for the diamond trading business”, he said.

“Relocating base is time-consuming and a painful process. I guess that is why the shifting from Opera House (Pancharatna and Prasad Chambers) to Bandra Kurla Complex is still going on despite the security risk here.”

Sanjay Kothari, vice-chairman of The Gem and Jewellery Export Promotion Council (GJEPC), said relocating to Surat could happen. “But there are over 2,000 families connected with the diamond trading business in Mumbai,” Kothari said. “It will not be possible to relocate all of them to Surat for personal and professional reasons. But the situation might change some years down the line and it could make sense then.”

Over 90% of world’s diamonds are cut and polished in Surat, the commercial capital of Gujarat. The customs clearance centre in the city, Surat Hira Bourse (SHB), operational since 1994 facilitates direct import and export of diamonds.

Also, the Surat Special Economic Zone (SurSEZ) has over 150 export oriented units, a significant percentage of them being from the diamond processing and jewellery making segments.

Shashikant Bhai Shah, diamond trading consultant with BM Gems, said Mumbai has traditionally been the trading and sorting hub for diamonds. “But Surat offers several advantages considering all the cutting and polishing is done there,” Shah said. “Combining it with trading and sorting would save traders save time and money on transporting the precious stones.”

Though Mumbai remains a terrorist soft spot, it has direct international connectivity, which is vital for an export oriented business like diamonds. And that is where it scores over Surat.

Talking about direct international connectivity, Mundra Port & Special Economic Zone (MPSEZ), a company promoted by Ahmedabad-based billionaire Gautam Adani, plans to build an international airport in Mundra. The company sent a proposal to the Board of Approval (BoA) in September last year. If the proposal is approved, MPSEZ will become the country’s first multi-product SEZ to have an international airport within its limits.

The possibility of shifting to Surat cannot be ruled out but manufacturing and trading do not generally happen at the same place in the country, Shah said.

Phase III of FM radio rollout gets go-ahead

This news story first appeared in DNA Money edition on Friday, July 8, 2011.

Radio buffs stay tuned in, the fare’s getting bigger.

The Cabinet on Thursday approved the information and broadcasting ministry’s proposal for expansion of FM, or frequency modulation, radio broadcasting services in the country.

Under the proposals —- the third phase of expansion, or FM Phase-III, policy —- FM radio services will be extended to about 227 new cities, in addition to the existing 86, with as many as 839 new FM radio channels covering 294 cities. In fact, all cities with a population of 1 lakh or above will be covered by private FM radio channels in this phase.

The rollout is expected to fetch Rs1,733 crore in revenue for the government.

Industry players welcomed the announcement.

The policy allows radio companies to expand their network, put a revenue multiplier in place and make radio a healthy and profitable business, said Tarun Katial, CEO, Reliance Broadcast Network Ltd (RBNL). “Some of the things the government has been able to resolve in Phase-III were actually the key issues for the industry and it looks like a policy that can bring about the transformation that radio desperately required, starting with the foreign direct investment limit being raised to 26% from 20%,” he said.

Ashesh Jani, partner, Deloitte Haskins & Sells, said the policy will give a boost to the sector. “More so because this opens an investment opportunity to many in an era of an uncertain stock market and limited vistas of investments.”

According to Jani, for both radio station owners and advertisers, spreading to newer cities amounts to tapping an untouched market.

Multiple licensing is another provision the industry has welcomed, saying it will lead to varied offerings such as sports, news and cultural affairs, helping expand radio’s reach further.

FM channels have now been allowed to carry news content sourced from All India Radio and give public service information, such as information on sports, traffic, weather, exam results, admissions, career counselling and job opportunities. Announcements concerning civic amenities, such as electricity, water supply, natural calamities and health, can also be broadcasted.

But there’s a catch —- the private players will most likely have to buy news content from AIR.

Harrish Bhatia, COO, MY FM, conceded as much: “The FM radio channel business will continue to be under stress, unless the music royalty issue gets resolved completely. We have been demanding extension of licences for 15 years and we still have no clarity on the same. Buying news content from AIR is also something that needs to be looked at differently.”

Also, though private operators can own more than one channel, they cannot own more than 40% of the total channels in a city.
Not everyone, though, is excited about the multiple-licensing provision, considering radio is still not a viable business. “I really don’t understand the logic behind multiple licensing in such a scenario. Besides, there are a few unresolved issues and I don’t think there would be many takers for this multiple licensing offer from the government,” a senior official at a FM radio company said on the condition of anonymity.

The government’s target of raising Rs1,773 crore from Phase-III rollouts, though, is seen as reasonable. “If there are over 400 frequencies coming in, I think it’s really worth the money,” said Katial.

But it is also a significant development for the Rs1,200 crore radio industry, feel analysts.

“Currently, the radio industry is relatively small but witnessing robust growth of over 20%. With the introduction of Phase III, the growth rate can go up to 30%. The share of radio in total advertising stands at 5% and is expected to increase to over 7% post Phase III. The development will further boost the strong performance of the leading players, which are expected to see 12-15% advertising rate growth accompanied by a double digit volume growth in FY12. The only concern is high bidding, which will impact the profitability of the players as it is an extremely cost sensitive business,” said Rahul Kundnani, analyst, SBICAP Securities Ltd.

The policy announcement also clears concerns over the government’s allocation approach. It outlines the conduct of ascending e-auction as followed by the telecom department for sale of 3G and BWA spectrum, with necessary changes, for award of FM channel licences.

“The route of auctions has not been cleared yet. We are hoping that it would be rational and the government will have enough spectrum in the market to keep it affordable,” said Katial.

Blackstone invest Rs 150 crore in FINO for a significant minority stake

The Blackstone Group has acquired a significant minority stake investing Rs 150 crore (approximately $33 million) in FINO, a pioneer in providing integrated technology solutions and physical network to enable financial inclusion in India. A channel with enabling technology platform, FINO provides for an end–to-end sourcing and servicing of micro customers in rural India on scale across a range of basic financial products and services. Ernst & Young (E&Y) advised FINO for this fund raising.

Commenting on the development, Akhil Gupta, chairman and managing director, Blackstone Advisors India Pvt Ltd, said that India has a significantly high number of financially excluded households – more than 100 Million, with an exclusion rate of over 50%. "The exclusion is much more prevalent in the rural areas. For sustainable and inclusive growth, India needs to extend basic utilities like financial services to the excluded population. As a dominant market leader, FINO is uniquely positioned to capitalise on this opportunity. While growing at almost 100% CAGR in the last few years, FINO has demonstrated conviction and commitment to changing India’s rural banking landscape.”

FINO works with most of the leading banks in the country across a comprehensive product suite - saving bank accounts, recurring deposits, loan products, remittances, insurance products, government subsidies disbursement, among others. The company has enrolled more than 35 million customers and plans to double its customer base in the next couple of years.

Manish Khera, chief executive officer, FINO Ltd, said, “The Company has done well and the outlook is even stronger with government focus of using Business Correspondent channel for cash subsidies and RBI’s drive to achieve total financial inclusion. FINO is a pioneer in the financial inclusion space and we plan to extensively leverage Blackstone’s global expertise of scaling up and transforming businesses.

"The money being raised will primarily be utilised towards funding overall growth of the company and to meet long-term capital requirements” added Rishi Gupta, chief financial officer, FINO.

Headquartered in Mumbai, FINO employs over 2,500 employees and 20,000 business correspondent agents spread across 239 offices. With over 35 million customer base across 300 districts across 24 states, FINO delivers financial products and services including banking, insurance & remittances in the first and last mile. FINO solutions are anchored around using biometric smart card, hand-held devices and Micro Deposit Machines to perform field operations and biometric authentication.

Sony Computer partners with Shah Rukh Khan's Red Chillies for RA.One PlayStation game

Leading console gaming player Sony PlayStation will soon release a PlayStation game based on this year's most awaited Shah Rukh Starer movie RA.One. To create this video game version of the movie called ‘RA.ONE – The Game', Sony Computer Entertainment Europe (SCEE) has partnered with Shah Rukh's Red Chillies Entertainemnt.

The storyline for this game has been developed by Shah Rukh Khan himself thereby creating an intrinsic connection between the game and the movie. The game has been developed exclusively on key PlayStation platforms of PS2 and PS3 (through PSN download).

Under the guidance of the SCEE team in London and in close co-ordination with the Red Chillies team for film characterisations and VFX, the game is being developed locally in Mumbai by Trine Games. It is being positioned as a prequel to the movie and introduces the keycharacters of the film and their various super-powers showcased in the film.

Atindriya Bose, Country Manager – PlayStation said, “We have always wanted to bring Bollywood IPs on PlayStation platform as the way of connecting to Indian audience. RA.ONE has the right mix of action, environment and imagination that is required to make a good PlayStation game, and with Shah Rukh Khan's immense passion and understanding of PlayStation games, we have chanced upon a very unique opportunity of a great game with Indian IP.”

The game provides an opportunity to the players to play as the key characters of the film: RA.ONE or G.One. Beyond these two characters, a few other key characters will also be included in the game. The film characters have been replicated closely for looks and animation and use the actual voice-overs from Shah Rukh Khan.

‘RA.ONE - The Game' will be rolled out in the India market and other key markets towards the end of September ’11 in close co-ordination with the actual film launch date. This will allow people to get an interactive sneak preview of the superpowers to expect and play in a complete sci-fi environment.

Displaying 6 unique characters and more than 20 game play environments from the ‘RA.ONE Universe’, the game entails multi-player action levels, including a robust set of assorted game mode options; it allows gamers to participate in infinite numbers of challenging matches.

Saregama India makes radio foray with Timber Media

Will launch 150 radio channels across mobile, direct-to-home and internet platforms

In a strategic move to enhance its music offerings globally, Saregama India Ltd (formerly The Gramophone Company India Ltd - HMV) has acquired a minority stake in Timbre Media Pvt Ltd. With this acquisition, Saregama now holds 10% equity interest in Timbre. The financial value of this transaction however, has not been made public.

As per the strategic alliance, the two parties will provide a high-quality and variety of genre-based radio channels. The association will also revive brand Worldspace which is under a licensing arrangement with Timber Media in addition to introducing another channel called Timber Radio by Saregame India as part of the initial offering. The radio channels will be made available through mobile, direct-to-home (DTH) and internet platforms.

Adarsh Gupta, Business Head – Music at Saregama India, said, “We will target the Indian market to start and will eventually extend the service to every international market with a considerable Indian population. The idea is to offer genre-based programming to the audience with as many as 150 channels offering different kinds of music to meet their specific tastes at different times of the day.”

The content for these radio channels will be sourced from Saregama’s extensive library in addition to music from other popular labels. A round the clock service, the radio stations will offer a variety of Indian music ranging from old hindi films, hindustani classical, carnatic classical, new hindi music, ghazals and stations in all major Indian languages.

M Sebastian, co-founder and CEO, Timbre Media, said, the company was instituted in 2010 and has over time established critical infrastructure needed for high quality services, including new studio facilities in Mumbai and Bangalore. “We have been steadily building partnerships and clientele in the radio and music industry including Saregama. This partnership will significantly enhance our ability to package and distribute quality music content and chalk out an aggressive expansion plan going forward,” said Sebastian.

An interesting part of this initiative will be the approach to programme, package and price the radio channels making it a very attractive proposition to the end user. “It will be like an fast moving consumer goods (FMCG) approach to packaging and pricing the offerings. So people can subscribe the channels for as little as 2 minutes with no outer limit depending upon their choice and requirement. Pricing and packaging details are currently being worked out and we shall be in a position to give out details in a few weeks from now,” said Gupta.

With discussions and negotiations currently on with mobile and DTH operators in the country, the service is very likely to hit the market through the mobile operators followed by DTH operators. The company expects to launch the the service in the market in another 6 – 8 weeks from now.

It's off-season, but with demand strong, Mumbai hotels just won't offer discounts

This story first appeared in DNA Money edition on Thursday June 30, 2011.

Hotels operating in the four-star and five-star categories in Mumbai appear to be holding on to their room rates, despite being in the off-season phase of business. The period between May and September generally being a low, hotels traditionally tend to lower rates to beef up business. However, with business yet to reach the peak of 2007-08 levels, hoteliers are playing it safe by not discounting too much, thereby avoiding volatility in business.

Sunil Bhatia, director, sales and marketing, The Mirador Hotel in North Mumbai, said, “Rooms rates are quite stable now as all the correction (if at all any) has already happened during April and May. Currently, hotels are focusing more on maintaining the existing levels of business. The reason being there is enough demand in the market for hotels to operate at a fairly sustainable level. In fact, there are times when demand tends to be almost 1.5 times of the hotel’s room inventory.” A four-star business hotel in Andheri East, The Mirador currently quotes an average room rate (ARR) of over Rs5,500 on a an occupancy of over 70%.

An attempt to make reservations across various hotels in Mumbai for different dates in June and July showed that the room rates quoted were the same for both months.

Except in case of advance bookings (15 days before the actual date of stay) some hotels offered a discounted rate on their current best available rate for the day. For instance, price quoted for room reservation at Trident Bandra Kurla for second week of July was Rs8,000 plus taxes, while the best available rate, including breakfast, was Rs10,000 plus taxes and a room only rate was Rs9,500 plus taxes.

Similarly, The Leela Kempinski Mumbai offered a discounted rate of Rs10,500 plus taxes (from Rs11,500 plus taxes) for room reservations in June and July. The price quoted for a base category room at their Chanakyapuri hotel was Rs15,023, including taxes and breakfast, for June and July.

The approach adopted by various hotels shows that the business environment hasn’t really changed much. However, there have been changes in the booking pattern and lead time, wherein bookings are very unpredictable.

“I had 20 unoccupied guestrooms during one of the days last week. Suddenly by afternoon we received a booking for all. The flow of bookings tends to be slow over weekends and is higher on other days, which is natural for a market like Mumbai. What is really happening is that buyers are shopping very intelligently and are booking rooms on a need-to-book basis. Besides, reservations are coming in volumes so business is certainly there. The only area where hotels are compromising on room rates is for large volumes and long-stay guests. Even for these customers, the discounts do not exceed more than 10%,” said a senior official from a leading five-star hotel in Mumbai.

While there is overall growth in the city of Mumbai, hotels in North Mumbai appear to have benefited the most. The occupancy and ARRs scenario in South Mumbai hotels is pegged in the 55-60% range and Rs8,500-9,000 range, respectively. Hotels like the Taj Palace wing and The Oberoi are estimated to be on the higher side i.e. over Rs15,000 in terms of room rates, though occupancies may not be as strong. Hotels in North Mumbai, however, are fairly neck-to-neck in terms of room rates, while occupancies are higher at 65% plus.

“Some of the big corporates like Hindustan Uniliever have relocated themselves in North Mumbai area as a result South Mumbai hotels are busy identifying replacement business for their respective properties. While business traffic had come down, conferences, training, weddings, etc are to some extent filling in the gap at present,” said the general manager of a five-star property in South Mumbai.

On the current business scenario in other key markets in the country, industry experts believe cities like Pune, Delhi and, in the coming months, Chennai will see pressure on room rates and occupancy.

PR Srinivas, industry lead - travel, hospitalty and leisure, Deloitte Touche Tohmatsu India Pvt Ltd, said, “While Pune continues to feel the heat of oversupply, Delhi is starting to witness the same with The Leela Palace at Chanakyapuri and a few other hotels that have opened and a few others scheduled to open in the coming months. I see a similar situation in Chennai as ITC will open its new hotel with over 500 rooms followed by The Leela and JW Marriot hotels. Together these hotels will add over 1,000 keys to the Chennai hospitality market leading to pressure on room rates and occupancy levels.”

Pratima Badhwar, director of sales, Courtyard by Marriott, Gurgaon, said while there is pressure in the Delhi hospitality market, the scenario in Gurgaon is much better. “Demand is fairly buoyant in Gurgaon and hotels here weren’t struggling much to fill rooms. We are doing 70% occupancy as against 62% last year.

While there has been a minor correction, the rates currently being quoted in Gurgaon hotels are between Rs7,000 to Rs9,500,” said Badhwar.

And more supply will be added to the Gurgaon market in the coming months. Accor will open its Pullman hotel while Hilton will launch its Double Tree brand. A Vivanta by Taj hotel is also expected.

Prime Focus plans units in New York, London

This news story first appeared in DNA Money edition on Thursday, Jun 23, 2011.

Prime Focus, visual entertainment services firm, would spend $15-17 million as capital expenditure on its domestic and international operations in the current fiscal. The expansion will be funded through internal accruals.

Namit Malhotra, managing director, Prime Focus, said on an analyst call, “Three facilities are being built in New York, London and Mohali. So there will be fairly significant amount of capex for that.”

The facility in New York will be a post-production set up while the London one would be a visual effects facility. These facilities will be operational within the next 3-4 months. In Mohali the company is looking to expand the existing unit.

Nishant Fadia, CFO, Prime Focus, told DNA Money, “The new Mohali facility will be for 2D to 3D conversions. While New York facility will not be very capital intensive, we envisage the London and Mohali facilities to take up a large part of the capital expenditure.”

The Mohali unit currently employs 730 people and the number is expected to more than triple by the year end. “We will be hiring anywhere between 2,000 and 2,500 people for the new facility at Mohali,” said Fadia.

On the back of Hollywood blockbusters like Star Wars: Episode I The Phantom Menace (yet to release in 3D) and the Warner Bros’ Green Lantern, the company sees exponential growth in its 2D to 3D conversion business.

The management believes 3D conversion is the most exciting part of their business and is already contributing substantially to the company’s topline.

“The 3D conversion business has been getting good traction from the international markets and has contributed $40 million to the company’s topline last year. With a robust pipeline for the next 24-36 months, we see substantial improvement in the business,” said Fadia.

The company currently has an order book of Rs350 crore, of which around Rs250-260 crore is for 2D to 3D conversion.

Prime Focus’ 2D to 3D conversion process, View-D, is a proprietary system introduced in September 2009. The company has thus far worked on a host of international projects including Avatar, Clash of the Titans, Cats and Dogs, Chronicles of Narnia and Shrek.

Warburg Pincus to fully exit Max Healthcare

This story first appeared in DNA Money edition on Saturday, June 18, 2011.

Warburg Pincus, the private equity giant, is exiting Max Healthcare Institute Ltd by selling remaining 16.37% stake in the healthcare services provider. A subsidiary of the publicly listed Max India Ltd promoted by Analjit Singh, Max Healthcare operates eight facilities in New Delhi and the National Capital Region and offers services in more than 30 medical disciplines.

Max India, in a notification to the Bombay Stock Exchange, said its board has approved the acquisition 4.76 crore shares of ¤10 each of Max Healthcare, constituting the entire shareholding of Warburg Pincus. The shares will be bought at an acquisition price of Rs29.40 a share for an overall consideration of Rs140 crore. The process is expected to be completed no later than December 15, 2011, after receipt of all regulatory approvals, the company said.

With this acquisition, Max India’s equity shareholding in Max Healthcare would stand increased to 91.84%. Warburg Pincus’ India office refused to comment. A Max India spokesperson said no additional information is being shared at this stage.
Warburg first invested in Max Healthcare in December 2004 when a preferential allotment was made to Madison Holding Ltd and Melany Holdings Ltd — both registered foreign institutional investors (FIIs) belonging to the Warburg Pincus group.Turn to

The allotment represented a 13.8% stake in the equity base of Max Healthcare. The investment, worth Rs 25 crore at that time, got Warburg 1.88 crore equity shares of Rs 10 each at an issue price of Rs 13.25 per share.

In June 2005, the Warburg made a follow-on investment, buying another 2.87 crore shares for Rs 115 crore at Rs 40 per share.
Max India held 70% stake in the fully diluted equity base of Max Healthcare and Warburg’s total investment in the company then stood at Rs 140 crore with a 23% stake.

That would mean Warburg sold the difference - or around 6.63% stake - some time earlier, because it’s exiting the company by selling 16.37% stake. So the price at which that 6.63% stake was sold would be the profit for Warburg since it had invested Rs 140 crore for a 23% stake and sold 16.37% stake for Rs 140 crore too.

Dish TV sees Arpu, subscriber base rising this fiscal

This news story first appeared in DNA Money edition on Thursday June 16, 2011.

Dish TV India, the country’s leading direct-to-home broadcaster, sees its average realisation per user (Arpu) rising this fiscal as it takes price increases and expands subscriber base. With its Arpu rising to Rs150 in the fourth quarter of the last fiscal from Rs142 in the preceding third quarter, Dish TV is keen to increase the realisations this year, too. It is understood to have given an Arpu guidance of Rs160-165 for this fiscal.

Also, the company has set a target of adding 3.3-3.5 million subscribers this fiscal after expanding the subscriber base by 3.5 million last fiscal.

Experts said the company’s business outlook for this fiscal has improved considerably owing to strong subscriber additions and hike in subscription price by Rs5-25 in May 2011. Also, the content costs would be almost fixed with just one contract coming up for renewal this fiscal.

Analysts said based on the subscriber addition and Arpu forecast, the company will be in a position to turn a net profit and become free cash flow positive by the fourth quarter.

Nitin Mohta and Atul Soni, analysts with Macquarie Capital Securities India (Pvt) Ltd, said the company) is fast approaching the inflection point on net profit and cash flow and should achieve these milestones this fiscal.

“We have raised the Arpu forecast by 4% in fiscal 2012 and another 4% for fiscal 2013. The management has announced another round of hike in subscription packages last month and we expect it to get fully reflected in the second quarter this fiscal,” said the analysts in their latest report.

They, however, see average realisation at Rs155 for this fiscal. “We believe small but regular price upticks, as done in May, would help the company to meet our forecasts,” the Macquarie report said.

Last February Dish TV launched a high definition (HD) service offering 35 channels at a monthly subscription of Rs450-550. As a result HD’s contribution to the company’s monthly additions improved to 7% as against less than 1% in the thirdquarter.

Targeting customers with HD TVs willing to subscribe to premium packages will have a favourable impact on the Arpu in the current fiscal, experts said.

The DTH industry will see an overall addition of 10-12 million subscribers this fiscal. “Dish TV is likely to have the highest market share of over 25%. As sales increase considerably, we envisage a reduction in their content cost as a percentage of revenues from 39% to 30% in fiscal 2012,” said Rahul Kundnani, analyst, SBICAP Securities Ltd.

The growing DTH subscriber base is led by rising income levels, increasing consumer awareness, a sports heavy calendar in 2011 and lower entry prices for new connections.

For Dish TV, Nupur Agarwal, analyst with UBS Investment Research, said the spurs are in the form of strong financial and operating performance, implementation of mandatory digitisation and likely reduction in licence fee.

“We believe receipt of pending government approval regarding implementation of mandatory digitisation in India is likely to be a catalyst for Dish TV as it could accelerate DTH subscriber growth. DTH is a heavily taxed industry in India, paying service tax of 10.3%, licence fee of 10% on gross revenue, entertainment tax, 5% import duty on set-top boxes, income tax or minimum alternate tax as and when the company starts generating profit before tax. We believe rationalisation of the tax structure or implementation of GST could act as a catalyst,” said Agarwal.