Zee Telefilms was received with some scepticism from investors over future growth, and the scrip dropped sharply from its early high of Rs 87.55 as a result.

In fact, by 10:15 IST on Wednesday, the scrip of India's largest media company slumped 6.68% to Rs 81.05 despite its so-so results announced yesterday. The counter saw volumes reach over 691,000 shares on BSE by then.

Yesterday, Zee Telefilms had recovered from its low of Rs 81.80 to end higher by 4.76% at Rs 86.85. In the 11 prior sessions between 10 and 27 January 2003, Zee Telefilms lost 21.23% to Rs 82.90 from Rs 105.25, as the market seemed none-too-excited about the forthcoming results.

On Tuesday, after market hours, Zee Telefilms unveiled its third quarter ended 31 December 2002 results. For Q3, the media company's consolidated net profit jumped 36% to Rs 70.88 crore compared to Rs 52.11 crore in the corresponding period of the previous year. Total income increased by 9.89% to Rs 325.02 crore (Rs 3.25 billion) from Rs 295.76 crore (Rs 2.95 billion) in DQ 2001.

Both net profit as well as net sales were in line with analysts' expectations (capitalmarket.com took a poll of five media analysts) - net profit of between Rs 59 crore and Rs 74 crore and net sales of Rs 321-351 crore (Rs 3.21 billion).

On a stand-alone basis, for the quarter ended 31 December 2002, Zee Telefilms recorded a net profit of Rs 22.19 crore (Rs 23.91 crore) on total income of Rs 141.13 crore (Rs 101.83 crore).

Looking ahead, the company said that in the fourth quarter of FY 2002-03, there is low visibility in the advertising revenue scenario because of the Cricket World Cup. There could be an impact on the business of Zee because of a shift in advertising revenues to cricket, particularly during the cricket matches.

The downbeat outlook had the scrip retreating, analysts say. The Cricket World Cup commences on 10 February 2003 and ends on 23 March 2003.

The Zee Telefilms scrip's fortunes have been affected of late after the promoters' plan to pledge equity to raise a loan of $40 million hit a roadblock. 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.

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