Zee News shares adjust for demerger of GEC biz

Shares of Zee News plunged because of the demerger. The Regional General Entertainment Channel (GEC) business of the company was de-merged and transferred to Zee Entertainment Enterprises Ltd. with effect from January 1, 2010 (appointed date). April 16 was fixed as the Record Date for determination of members of the company who would become eligible for issuance of equity shares by Zee Entertainment Enterprises. For every 19 shares of Zee News one received residual portion of Zee News shares as well as four shares of Zee Entertainment. The Zee News stock fell by more than 75% cent on April 15 and traded at a market capitalisation-to-sales ratio of about two times, based on estimated sales of around Rs2.4bn that the company may achieve in FY11. Zee News reported revenues of Rs4.69bn for the nine months of FY10. When the demerger was agreed in October 2009, the GEC business contributed about 65% of Zee News' topline and 95% of operating profit. Now with only news channels in its fold, Zee News would be a loss-making company.