Sun TV,Spice Jet – Why you should not invest in Crony Capitalism Stocks/Companies as COO goes to Jail,Promoter Maran accused of Corruption as DMK Loses Power,Thaksin Stocks Rally
Hyundai Solar Panels (250) Review of Sale Prices, Dimensions, Cost (UK, Australia)
July 4, 2011Are Molycorp,REE Stocks in Trouble as 100 Billion Tons of Rare Earth Minerals found beneath Pacific by Japanese
July 4, 2011Sun TV is one of India’s largest media companies having interests in TV,Print and Cable Networks with a predominant focus in the southern state of Tamil Nadu.The stock used to trade at lofty valuations as it showed strong growth and margins year after year.The promoter of this company are the Marans who are nephews of Karunanidhi chief of the DMK regional political party.With close access to the levers of power,the company owners could manage to drive away the competition using extra judicial means as was seen in the case of Hathaway Cable.One of the Maran brothers is the Textile Minister of India and before that he was the Telecom Minister of India.However Sun TV has started tanking as the DMK which was ruling in Tamil Nadu lost the elections to the opposition recently.This has resulted in Sun TV coming under massive pressure as the new government comes out all guns blazing.The AIDMK is proposing the nationalization of the cable TV network in the state which would lead to massive loss as it is a huge cash generator for Sun TV.
An unnamed Central Bureau of Investigation official said that preliminary investigation has started against Dayanidhi Maran, the telecom minister from 2004 to 2007.The shares the Tamil based channel, Sun TV, and the low cost airline, Spicejet, fell as much as 31.1 percent and 13.5 percent, respectively. Both these companies are controlled by Maran’s elder brother.
Not only that but with the loss of political power,Sun TV executives can no longer manage to intimidate the industry.The Sun TV COO Saxena was hauled off to jail in a cheating case filed by a film producer.Note this would have never happened in the earlier DMK regime as the police would have refused to even lodge a case let alone put Saxena in jail.Crony Capitalism is not without its dangers and betting on these stocks is not a great idea.The reason is that once the political party loses power which happens quite frequently in India then the businesses close to that party come under serious fire.Note Dayanidhi Maran is also facing the heat in the 2G Scam where he has been accused of amassing huge amounts of money by favoring close promoters.When he was the Telecom Minister the whole Sun TV group of companies used state telecom infrastructure for free.The whole lesson from this is that betting on stocks/companies close to the ruling party might not be a good idea.In fact opening an event driven hedge fund might be a good idea using power changes in crony capitalist democracies.Thaksin stocks are rallying Thailand today as his sister has won the elections.
Jayalalitha scraps flagship projects of DMK regime
Apparently targeting the Maran brothers, who own a media empire, the government also said it would nationalise the multi-crore cable TV business, over which they have near monopoly, and revive state-run Arasu Cable TV Corporation to manage the industry.
Citing “overwhelming demand” from public for the revival of Arasu Cable TV Corporation, Barnala said the government would do so “in public interest” and nationalise the cable TV operations without affecting local cable operators, as assured in the AIADMK’s poll manifesto.
The Arasu Cable TV Corporation was set up by the Karunanidhi government in July 2008 after the Marans fell out of favour with the DMK patriarch’s family but it remained dormant after the two sides patched up later.