B.A.G. Films and Media Ltd back to under Rs 13 from just under Rs 105…It had never deserved to shoot up like this!

Just saw the mandatory detailed Q 3 Results of B.A.G Films and Media Ltd given by the Company in the Sunday Edition of Business Standard

It has earned just Rs 16 lakhs in Q 3 in the three months to December 31,2008 but has capital deployed of Rs 185 crs….with Rs 29 crs in Audio Visual Production and Rs 5 crs in Movies and the bulk of Rs 75 crs shown deployed in Leasing and Rs 76 crs shown as unallocated

As is required the results also show the Funds Utilisation of the various Preferential Issues.

One of the Preferential Issues was of Rs 26.33 crs raised by the allotment of 20250000 Equity Shares(17.95% stake) of FV Rs 2 at a Premium of Rs 11 to Sameer Gehlaut…He  is one of the promoters of IndiaBulls

Now this rung a strong bell.

This Issue in 2007 had raised the spectrum and strong suspicion of Insider Trading by the Husband & Wife Promoter Couple of B.A.G.Films,Rajiv Shukla and Anurradha Prasad…Mr Shukla is on media channels virtually every other day giving some sound byte or the other,either in his capacity as a leading functionary of the BCCI (India’s Cricketing Body) or of the Congress 

This is what had transpired two years ago in January 2007 and there has been no Investigation or clarification,either by BSE or by SEBI,despite their awareness.

Promoters,Chairperson & Managing Director,Anurradha Prasad and Director, Rajiv Shukla purchased shares of BAG Films on Jan 3,8 and 9,2007 before the Board Meeting on Jan 15,2007 to consider preferential allotment at Rs 13 to Sameer Gehlaut (promoter of IndiaBulls).Aggregate of 611283 shares were picked up,with the bulk of 567583 done so by Mr Shukla.These shares had been picked up from secondary market purchases between Rs 9.16 and Rs 12.45

On Jan 17,2007, BSE uploads their notice for the preferential allotment on the website

Price on Jan 17,2007 crossed Rs 20 and closed around Rs 19  …Price had doubled inside two weeks and volumes exploded.From the January 2007 high of Rs 23,the share price zoomed to a high of Rs 104.90 in the same year in November 2007

Those who suffered are the poor sellers in the first ten days of January 2007 at these prices of Rs 9.16 to Rs 12.45 as they were unaware of  what was unfolding!

 Ironically the company had send BSE notices for the promoter acquisition under  Regulation 13 (6) of SEBI (Prohibition of Insider Trading) Regulations, 1992  and BSE site shows these uploaded on Jan 10 and Jan 15,2007

The share price has now touched a 52 week low of just under Rs 13 from a 52 Week High of Rs 61….What goes round must come round ! 

The shares have not yet been sold by the Promoters and they have also exercised their option to convert One crore Warrants into Equity Shares at Rs 13/share in two tranches…these warrants were issued to them along with the preferential allotment to Sameer Gehlaut

However this is poor consolation for those over 5000 shareholders ( assumed,as Shareholders dropped from over 23000 as on December 31,2006 to @ 17600 as on March 31,2007)  who sold off the share cheap in the first ten days of January 2007…Wonder why these shareholders did not raise a stink…or if they had tried was their effort scuttled ?

My clients too had Invested in BAG Films on my advice based on Interesting Developments of IDBI Investing in a subsidiary and the potential of the FM Radio License in the Subsidiary…However when Jan 2007 events happened I told them that the Share Price will definitely surge but I would appreciate if they exited the stock as I was not inclined to support any Insider trading scenario…Taking an Investment Risk on a Research Call is one Issue…Insider Trading is quite another….all clients exited BAG Films in January 2007 itself

Other Big Preferential Allotments by BAG Films were made in 2007 and 2008 as below

• 9400000 shares (8.33% stake) to FID Funds Mauritius Ltd at Rs 60.15 to raise Rs 56.54 crs
• 13078000 shares(11.59% stake) to High Growth Distributors Pvt Ltd at Rs 20 to raise Rs 26.16 crs
• One crore warrants to promoters with the option to convert to equity at conversion price of Rs 60.15…only mandatory upfront payment was made of 10%…that is Rs 6.015 per warrant or Rs 6.015 crs…Warrants are yet outstanding and will surely lapse as option may not be exercised as current share price is below Rs 13 

The Results published in Sunday’s Business Standard disclose that Rs 113 crs or over 88 %  of funds raised have been utilised for Expansion in the Field of Media Entertainment,including Investment in Subsidiaries and Bank Guarantees…no real specifics given and I sincerely hope these phrases are not just euphemisms !

Would be interesting to see if any of the promoter shares are pledged…they would have to disclose this now under new SEBI directions 

Competition is tough in the Media Field and with these challenging times with Business Slowing Down,it is unlikely that BAG Films and Media will perform well

Reserves at @ Rs 150 crs and an Equity of Rs 24.56 crs (FV Rs 2) may indicate a Networth of close to Rs 175 crs and a Book Value of @ Rs 15…but do remember these Reserves have been largely created by High Premiums on the Preferential Issues and not by Operating Profits and we know really how productively these have been deployed !

When there exists some unanswered questions on Promoters and Management’s Intent and Gameplan ,why even go to the next stage of assessing the Business Model and Financials to try and arrive at any Valuation based on potential and prospects

Having said this I was intrigued to see that Number of Shareholders as on December 31,2008 has actually moved up smartly to 31247 from 22591 just a year ago as on December 31,2007.Further Investigation shows the Incremental jump is in the Jan-March 2008 quarter when shareholders moved smartly to 29641 as on March 31,2008…so it would clearly seem there are atleast 7000 shareholders who entered BAG Films in the High Price Range of Rs 80 to Rs 90

Atleast we cannot accuse the Promoters of exiting at these High Prices a year ago in january 2008 !

Market is truly a Great Leveller !