Zee Telefilms emerged as the biggest loser in the 30-share BSE Sensex on reports that the company's plan to pledge equity to raise a loan of $40 million has hit a roadblock.

By 12:15 IST, the scrip of the largest listed media company slipped 0.78% to Rs 95.45. It registered volumes of over 819,000 shares on BSE by then.

In the four sessions between 9 January and 16 January 2003, Zee Telefilms lost 8.6% to Rs 96.20 from Rs 105.25. Prior to that, the scrip rose 9.35% from 96.25 between 30 December 2002 and 10 January 2003 on news that the company was pledging its shares in order to raise a loan.

Securities and Exchange Board of India is understood to have written to the Foreign Investment Promotion Board to put on hold the proposal by the promoter group of Zee Telefilms to pledge five crore of the company's shares with Credit Suisse First Boston Corporation following the pending investigation into alleged irregularities in certain transactions of the company and its promoters.

Sebi stated that it has not completed the investigation over the alleged rigging of Zee Telefilms shares during the stock market scam. Sebi is understood 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.

Zee Telefilms has already received a formal clearance for the proposed transaction from the Reserve Bank of India subject to a mandatory approval from FIPB in the event of invocation of the pledge by CSFBC because the issue involves change in foreign ownership of equity shares.

Earlier, the Subhash Chandra group had finalised plans to pledge equity shares of Zee Telefilms with CSFBC for a three-year term loan of $40 million (Rs 192 crore).

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

Analysts say the pledging of shares would have benefited Zee Telefilms, as the funds inflow would have been used for the company's enhancement, but with Sebi's intervention the pledging willl now take some time.

Sebi also announced that domestic exchanges should not include Zee Telefilms in the extended list of derivatives trading since an investigation by the market regulator is being undertaken with respect to the stocks over the March 2001 stock market crash.

On a consolidated basis for the second quarter ended 30 September 2002, Zee Telefilms registered a very 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 billon). 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 52.5%, while the public and institutions held 8.7% and 32%, respectively.

BSE Code: 505537