Pentamedia Graphics: great plans, yet a sceptical market

11 December 2000

The signs are all positive for the Chennai-based Rs 389 crore turnover Pentamedia Graphics Ltd. Nevertheless one question continues bother anlaysts, "when will the scrip price go up?"

Not so long ago the scrip was at dizzy heights, with the price ruling at Rs. 2,344. From these dizzying heights the scrip has gone through a great fall to Rs. 316. After languishing at Rs.347-band for sometime, it is now changing hands at around Rs. 350.

Ranked third in the $25 billion global animation business, the company is growing at a scorching pace of 35 per cent per annum. It is engaged in three main spheres of activity viz. 2D and 3D animation, special effects (big, small and personal screen) and multimedia activities that includes New Millennium TV (Num TV)-the web casting division-and CD-ROM duplication.

For the first half of this fiscal Pentamedia reported a turn over of Rs.249.49 crore, up by 45 per cent as compared to the previous year's corresponding period. The net profit too went up to by 42 per cent to Rs. 66.63 crore. The company hopes to close this fiscal with a turnover of around Rs.500 crore. For an entertainment company's scrip with a P/E of just 8 times should be a steal. But the market doesn't think so.

Its recent achievements have not enthused the investors. The company recently acquired a 51 per cent stake in the Nasdaq-listed Film Roman Inc for $ 15 million cash thereby enhancing its opportunities and capabilities for larger animation orders. (see Focussing on profitable partnerships) It has been ranked as world number three in the animation industry by US-based Pixel-The Computer Animation Directory. It has also hived off Num TV into a separate subsidiary, thereby freeing Pentamedia from the risks of a new medium.

So what is that bugging mutual funds and industry analysts to keep away from Pentamedia's counter?

"Lack of transparent accounting," is the crisp answer one gets from a south-based mutual fund official.