Dish TV India, the Essel Group owned direct-to-home (DTH) company, will raise Rs 1,140 crore through a rights issue priced at Rs 22 per share. In a weekend statement, the company said it would offer 121 rights shares for every 100 held.

The equity expansion is very important, as Dish TV does not have the balance sheet strength to otherwise bankroll its expansion plans for the DTH market and for the fact that competition has increased with the new entrants in the sector. These factors have weighed on the valuation of Dish TV, which is the only listed stock in this space.

In the near-term, a couple of factors augur favourably for DTH operators and, by extension, the company. One is the proposal to reduce the DTH licence fee from 10 per cent of gross revenues to 6 per cent, and that the FDI limit will be increased to 74 per cent.

TRAI has also stepped up pressure on broadcasters to offer their channels to DTH operators on an a-la-carte basis and at lower rates, which could considerably reduce content acquisition costs for DTH operators. However, with competitive intensity increasing, Dish TV remains suitable for investors with a high risk appetite, who are prepared to stay on for the long haul.

Televisionpoint.com first reported on April 08, 2008 that the DTH service provider is looking at raising the money through a rights issue. At that time, a Dish TV spokesperson declined to comment.

However, industry sources said the company is looking at raising money through the rights issue after its Rs 250-crore deal with Future Capital’s private equity arm Indivision Capital didn’t work out due to adverse market conditions then.

In the past, the company has said that it is looking at investing more than Rs 850 crore till 2010 to be able to achieve an estimated 5 million subscriber base. Dish TV was listed on the bourses on April 2007.

Recently the company has announced its net subscriber base at 3.94 million. Dish TV has added 5,29,077 subscribers in the Q2 FY’09 as compared to 2,77,896 subscribers in Q2 FY’08 resulting in a robust growth of 90 per cent. The adoption of the DTH market category has now reached around 4,50,000 subscribers on a monthly basis.

Currently, Dish TV has a market share of 54 %, with 3.94 million DTH subscribers, while Tata Sky has 2.2 million. Big TV, which launched its DTH service recently, has not issued any subscriber numbers yet. Sun TV also offers DTH and has pan-India ambitions. The other two planning to join the DTH race are Bharti and Videocon.