Chennai-based Sun TV's stock crashed as much as 27.6 percent in intra day trade before closing 21.7% lower on Monday. This came after home ministry rejected a proposal to provide security clearance to thirty three TV channels of the Chennai-based network. Under India's broadcast laws, these channels won't be able to air without the clearance.
Traders sold in droves after the home ministry said that airing of the channels would have an adverse impact on the economic security of the country. That raised concerns that the company's broadcasting licence might be cancelled. That would be catastrophic both for the firm — which made Rs 740 crore of profits from channels — and for its billionaire owner Kalanidhi Maran, whose brother Dayanithi Maran was union telecom minister in UPA-1 government.
Last month, the government had refused to renew security licenses for its 50 radio stations that operate under Suryan FM and Red FM brands. The company has since moved the Madras High Court on the issue.
For the Sun Group, trouble has been brewing since it applied for licence renewals to MIB for its 50 radio stations which operate under the Suryan FM and Red FM brands. These needed fresh security clearances from MHA, which was denied.
Ongoing legal cases against Maran and his brother Dayanidhi, former telecom minister, might be the main reason for denial of the radio and TV licences. The Central Bureau of Investigation says that Dayanidhi forced the sale of Aircel to Malaysia's Maxis Group, and in exchange Maxis invested in the group's direct-to-home venture. They are also facing a probe in another case where the CBI alleges that 300 high-speed BSNL telephone lines were illegally allotted to Dayanidhi's house in Chennai, and then extended to his brother's company offices. This happened while Dayanidhi was telecom minister.
In April, the government seized assets worth Rs 722.5 crore from the Marans, who are among the richest families in India.
In an interview earlier today, Sun TV CFO SL Narayanan told CNBC that he doesn't think the licenses will be revoked. That failed to arrest the slide, save a slight paring of losses.