RIL to Buy Con­trol­ling Stake in Net­work 18 Through Trust

The Economic Times - - Business Of Brands - OUR BUREAU

Re­liance In­dus­tries (RIL) has agreed to pro­vide fund­ing of up to .` 4,000 crore to the In­de­pen­dent Me­dia Trust (IMT) for ac­qui­si­tion of Net­work-18 Me­dia and In­vest­ments, one of the coun­try’s big­gest me­dia com­pa­nies, RIL said in a state­ment on Thurs­day. RIL, In­dia’s largest pri­vate sec­tor com­pany by rev­enue and mar­ket cap­i­tal­i­sa­tion, is the sole ben­e­fi­ciary of IMT and will act as a per­son in the statu­tory open of­fers re­sult­ing from the ac­qui­si­tion. “IMT would use the funds to ac­quire con­trol over Net­work 18 and TV 18… IMT would be mak­ing open of­fers to pub­lic share­hold­ers for ac­qui­si­tion of eq­uity shares in Net­work 18, TV 18 and In­fo­me­dia Press. IMT would be si­mul­ta­ne­ously mak­ing the Pub­lic An­nounce­ment un­der Takeover Reg­u­la­tions. RIL would be a Per­son Act­ing in Con­cert to the open of­fers,” ac­cord­ing to a state­ment is­sued by RIL. TV18 and In­fo­me­dia Press are sub­sidiary com­pa­nies of Net­work 18.

This tran­si­tion is likely to re­sult in Raghav Bahl, the pro­moter of the Net­work18 Group, ex­it­ing the me­dia em­pire he founded two decades ago. Es­sen­tially, the trans­ac­tion an­nounced on Thurs­day amounts to a con­ver­sion of loans given by RIL in 2012 into shares in Net­work18 group com­pa­nies. The press re­lease by RIL said the ac­qui­si­tion would re­sults in syn­er­gies with its up­com­ing 4G plans be­cause of the dig­i­tal, e- com­merce and broad­cast con­tent of the Net­work 18 Group. Ap­par­ently as a pre­cur­sor to the im­pend­ing an­nounce­ment, in the last 48 hours, Net­work 18 had seen a spate of top level-res­ig­na­tions. On Wed­nes­day, Net­work18 Me­dia and In­vest- ments’ chief ex­ec­u­tive of­fi­cer (CEO) B Sai Ku­mar had re­signed, the com­pany said in a fil­ing to the BSE. This was fol­lowed by the res­ig­na­tion of RDS Bawa, the group’s CFO which was also no­ti­fied to the ex­changes a day later on Thurs­day. Even though no of­fi­cial an­nounce­ments were made, but mul­ti­ple sources in the or­ga­ni­za­tion con­firmed that chief op­er­at­ing of­fi­cer (COO) Ajay Chacko had also left the me­dia house along with Sai Ku­mar on May 28. All three were part of the or­ga­ni­za­tion since its for­ma­tive days. Post con­ver­sion IMT will end up as the sin­gle largest share­holder in both the com­pa­nies. IMT will di­rectly own 78% in Net­work 18 and 9% in its sub­sidiary in TV18, the press state­ment said. Flag­ship Net­work 18 and its broad­cast­ing arm TV18 op­er­ate over 30 chan­nels along with its JV part­ners like Vi­a­com, AETN Net­works and sub­sidiaries. The bou­quet in­cludes both news prop­er­ties like CNN IBN, CNBC-TV18, CNBC Awaaz and gen­eral en­ter­tain­ment chan­nels like Col­ors, MTV, Nick and His­tory TV18. Some of these chan­nels com­pete with ones owned by Ben­nett Cole­man & Co, the pub­lisher of this news­pa­per. While the takeover by IMT had been an­tic­i­pated for a while the res­ig­na­tion of the top 3 Net­work 18 ex­ec­u­tives in the last 48 hours had com­pounded the spec­u­la­tion. Shares of both Net­work 18 and TV 18 have been mov­ing up. While the for­mer was up 7.12% at .` 45.15/share, the later closed at .` 34.95/share, up 2.4% on Thurs­day. Cur­rently, pro­mot­ers held 72.98% stake in Net­work18 Me­dia and 59.75% in TV18 Broad­cast. The changes in con­trol also trig­ger a manda­tory open of­fer. Par-

RIL said the ac­qui­si­tion would re­sult in syn­er­gies with its up­com­ing 4G plans

ent Net­work 18 owns 51.2% in TV 18.

“We were ex­pect­ing this. While this could po­ten­tially in­crease com­pet­i­tive in­ten­sity in the TV broad­cast­ing space, one needs to see how much fo­cus and band­width of RIL will be avail­able to Net­work18/TV18. Net­work18/TV18 will be a good fit to RIL's con­sumer fac­ing businesses like 4G, re­tail, IPL team etc. RIL is likely to bring in the best talent avail­able for run­ning the me­dia busi­ness given the re­cent ex­its,” says Ab­neesh Roy, as­so­ciate di­rec­tor, In­sti­tu­tional Eq­uity Re­search, Edel­weiss.

For the fi­nan­cial year ended March 2014, to­tal rev­enues of Net­work 18 rose by 6.9% to .` 2834 while TV 18 rev­enues gained by 16% to .` 1,965 crore over the pre­vi­ous year. Op­er­at­ing profit of both com­pa­nies have im­proved fol­low­ing a se­ries of non-core di­vest­ments like Newswire18, a news agency, as­set sales in In­fo­me­dia18 and stake sales in a few businesses like Book­myshow.com and se­vere cost-cut­ting ex­er­cises which in­cluded lay­offs across the group. Net­work 18 posted a net profit of .` 28 crore for the year ended March 2014 against net losses of .` 198 crore for the year ended March 2013. TV18 posted a net profit of .` 104 crore for 12 months ended March 2014 against a loss of .` 25 crore over cor­re­spond­ing pre­vi­ous year.

Shares of Net­work 18 have rose 17% to .` 45.15 a share ever since the deal with RIL was an­nounced on Jan­uary 3rd 2012 against 56% jump in the Sen­sex in the same pe­riod. TV 18 stock has risen only 44%. “The 12-minute ad­ver­tis­ing cap has hit news chan­nels hard. Un­like gen­eral en­ter­tain­ment or sports chan­nels, sub­scrip­tion rev­enues too have not re­ally kicked in while car­riage costs have marginally come down by 10-15% across the in­dus­try. It’s a very tough en­vi­ron­ment,” said a leading me­dia sec­tor banker.

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