MUMBAI: Direct-to-home (DTH) television service provider Tata Sky has planned equity infusion of over Rs 5 billion every year over the medium term to meet its capital expenditure and for serving its debt.

The additional equity will be raised from investors other than the promoters and will result in dilution of Tata Sons‘ shareholding from the current 60 per cent but is expected to be gradual.

Tata Sons would remain the single largest shareholder in Tata Sky after the equity infusions over the next few years. Tata Sons holds 60 per cent stake in Tata Sky while News Corp. has an effective stake of 29.8 per cent.
CRISIL, which has rated its bank facilities and debentures, believes that management control will remain with Tata Sons and Tata Sky‘s association with the Tata brand will continue even after its stake gets diluted.

Tata Sky has Rs 17.01 billion of bank facilities and recently raised Rs 1.6 billion through a debenture issue.

The Indian DTH industry is characterised by the presence of few dominant players, leading to intense competition. The competitive intensity is reflected in frequent launches of special offers and discounts and high marketing spends by these players, whose primary goal is to increase their market share. While the industry has witnessed healthy subscriber additions, the overall profitability remains low. CRISIL believes that Tata Sky’s operating performance will improve over the medium term. It also believes that the company’s financial risk profile will remain weak over the same period, marked by negative net worth and stretched debt protection metrics.

Tata Sky narrowed its net loss in the year ended 31 March 2012 from a year earlier, on increasing subscriber numbers.

Tata Sky’s net loss in 2011-12 was Rs 2.98 billion, 36 per cent less than Rs 4.7 billion a year earlier. The company‘s net loss in 2009-10 was Rs 6.26 billion on total income of Rs 11.10 billion. The company‘s net sales were up 18 per cent to Rs 15.9 billion from Rs 13.5 billion a year earlier.

The continuing losses have resulted in piling up of accumulated losses. Tata Sky‘s accumulated losses as on 31 March 2012 would amount to Rs 43.03 billion with the addition of loss in 2011-12 to the accumulated losses of Rs 40.05 billion as on 31 March 2011.