Clearing the air Pentamedia Graphics

The Chennai-based animation major, the Rs.389 crore turnover Pentamedia Graphics, is in deep trouble. On one hand, there are allegations that the company paid huge sums to acquire small overseas/domestic companies, and on the other, its high profile acquisition, Film Roman Inc., is facing a sexual harassment case filed by four of its female employees.

In addition, Pentamedia Graphics is yet to see any signs of Rs 183 crore that Pentasoft Technologies Ltd, a group company, owes it. The latter is reported to be considering an overseas issue for quite sometime.

According to sources, Pentamedia Graphics is slightly reworking its broadband portal, Num TV's strategy. Num TV, a separate division, is pruning its loss-making activities and has sent out some employees of its radio channel due to insufficient revenue.

At the bourses, it is a vertical fall for the company's scrip. Pentamedia's scrip is now changing hands for less than Rs. 96 (as of 29 March 2001) after being traded for Rs. 350 just a couple of months ago. (See a related story, Pentamedia Graphics: Great plans, yet a sceptical market)

In an interview with domain-B, Mr. K. Srinivasan, director and chief operations officer (COO), Pentamedia Graphics, tries to clear the clouds that surround the company's prospects. Excerpts:

domain-b: Pentamedia Graphics is said to have paid more than the market price for acquiring Film Roman Inc., USA. When its director, Mr. John Hyde, acquired 50,000 shares in two tranches for $0.75 and $0.56 respectively, why did Pentamedia Graphics not resort to market purchases instead of inking a deal for $15 million to acquire 60 per cent stake in the US company?

Mr. K. Srinivasan: The acquisition of Film Roman is purely based on the following factors. Firstly, it is a 16-year-old company having major clients. It continues to produce The Simpsons, King of the Hill, The Oblongs and X-men. Moreover, Film Roman has ongoing relationships with nationally known networks producers and clients. It also has a number of new projects in production, pre-production and development that are partnered with major clients assuring long-term sales. In addition to all this, it is the second-largest film production unit in the US, working for global companies like Warner Brothers and Pixel.

Further, we did not purchase any shares from them. Our holding in the company has come through the issue of fresh shares and hence, the cash is going to the company and not to individual shareholders.

Keeping the above factors in mind, we acquired Film Roman for $15 million only after due diligence. Today, Film Roman has orders worth of $40 to $45 million. From their total loss of $4.20 million, they have minimised their loss to the tune of $200,000. Mr. John Hyde and his team are quite confident that they will come out with positive results during the first quarter.

domain-b: What is the possible impact of the sexual harassment case filed by four female employees of Film Roman Inc. Have you provided for the damages in Pentamedia Graphics' accounts? Was the company aware of the case when it acquired Film Roman?

KS: There is nothing to be alarmed about. Film Roman has sorted out all the problems. We have hired a professional US legal firm and it has already been taken care off. These are very small issues and need not require much importance.