Zee Telefilms had to contend with institutional selling and turned out the biggest loser in the Sensex in morning trades on Monday.

In fact, by 10:50 IST, the scrip of the media major dropped 4.51% to Rs 80.50 . It registered volumes of over 3.49 lakh shares so far. The scrip has now lost 23.5% to its current level from Rs 105.25 on 10 January 2003.

Much of the decline on the counter is being attributed to Alliance Mutual Funds' going the whole hog selling over the last couple of sessions. In addition, on Thursday (23 January 2003), Indian mutual funds sold over Rs 100 crore worth of equity on the domestic bourses.

Alliance Mutual Funds is faced with huge redemption pressure following an announcement that the fund is closing down its Indian operations. Selling was seen almost across the board encompassing New Economy, Old Economy and defensive sector stocks.

However, other developments have also plagued the counter of late. One being that the promoters' plan to pledge equity to raise a loan of $40 million hit a roadblock. Recently, there were reports that the Securities and Exchange Board of India had written to the Foreign Investment Promotion Board to put on hold a proposal by the promoter group of Zee Telefilms, to pledge five crore ZTL shares with Credit Suisse First Boston, pending investigation into alleged irregularities in certain transactions between the company and its promoter.

Sebi said that it has not completed the investigation in respect of the alleged rigging of Zee Telefilms shares during the stock market scam. The market regulator was said to be looking into several issues, including the alleged use of inter-corporate deposits to fund certain friendly brokers who, in turn, helped control the market price of the company's stock. Sebi also directed the domestic exchanges not to include Zee Telefilms in the extended list of stocks for the derivatives segment.

As per reports, Delgrada, a Mauritius-based overseas corporate body owned by the promoter of Zee Telefilms, Subhash Chandra, had plans to pledge 5 crore equity shares with CSFB, Singapore. In case Delgrada was unable to repay the loan within the stipulated period of three years, CSFB would have the right to invoke the pledge and acquire ownership of the equity shares, paving the way for a substantial stake in Zee Telefilms.

Earlier, Zee Telefilms had already received a formal clearance for the share pledge transaction from the Reserve Bank of India, subject to mandatory approval from the Foreign Investment Promotion Board in the event of invocation of the pledge by CSFB, as the matter involved change in foreign ownership of equity stake.

Meanwhile, Zee Telefilms is scheduled to unveil its third quarter ended 31 December 2002 results tomorrow. For Q3 Zee Telefilms is expected to register a net profit growth in the range of 25-42% to Rs 65-74 crore on a 15-26% increase in sales to Rs 321-351 crore.

On a consolidated basis, for the second quarter ended 30 September 2002, Zee Telefilms registered a nominal growth of 2.36% in net profit to Rs 54.55 crore on an 11% rise in sales to Rs 274.55 crore (Rs 2.74 billion). The rise in sales was largely due to an increase in subscription revenues, up by 55.3% to Rs 121.1 crore (Rs 1.21 billion). However, advertising revenues continued to remain under pressure. In fact, there was a 6.6% fall in these revenues to Rs 131.4 crore (Rs 1.31 billion).

As on 30 September 2002, the promoters' holding in Zee Telefilms was at 52.5%, while the public and institutions held 8.7% and 32%, respectively.

BSE Code:505537