MUMBAI: Raghav Bahl has taken the next big step to infuse capital into his two debt-laden leading companies and fund the acquisition of Hyderabad-based ETV that would help him spread his media empire into the fast-growing regional markets of India with the support of cash-rich Reliance Industries Ltd (RIL).

After getting the Sebi nod for going ahead with the rights issue, Network18 Media & Investments Ltd and TV18 Broadcast Ltd on Friday fixed the the price of their rights issues at a discount to their closing prices to raise Rs 26.99 billion each.

Network18 is offering 307 shares for every 50 shares at a price of Rs 30 per share, a discount of 5.66 per cent to its closing price of Rs 31.80 on the National Stock Exchange (NSE).

TV18 is offering 41 shares for every 11 shares held at a price of Rs 20 per share, a discount of 4.76 per cent to its closing price of Rs 21 on the NSE.

Since Network18 group owns 59.76 per cent of TV18, the net capital raised from the rights issues will be Rs 43.12 billion.

The funds to be raised from the rights issues are meant for TV18?s acquisition of ETV news and general entertainment channels, except the Telugu GEC from Reliance Industries Ltd (RIL) for Rs 21 billion. RIL will fund the Network18 promoter companies for subscribing to the rights issues and in exchange will get optionally convertible debentures issued by the promoter companies.

RIL will lend a minimum of Rs 17 billion through investments in optionally convertible debentures. If none of the non-promoter shareholders subscribe to the rights issue, RIL will have to lend Rs 43.12 billion to Network18 promoters to ensure both the rights issues go through.

The record date for Network18 shareholders is 12 September and for TV18 shareholders is 17 September. The Network18 rights issue will open on 18 September 18 and close on 4 October, while that of TV18 will open on 25 September and close on 15 October.

Both the issues are huge compared to their market capitalisation as of Friday. Network 18?s rights issue is nearly six times its market capitalisation of Rs 4.61 billion and that of TV18 is nearly 3.5 times the market capitalisation of Rs 7.78 billion.
 

MUMBAI: The path has been cleared for Network18 Media and Investments Ltd and TV18 Broadcast Ltd to raise Rs 27 billion each through rights issues.

The Securities and Exchange Board of India (Sebi) gave its observations on 17 August on the draft offer documents filed by Network18 and TV18 in March 2012. The companies now are required to go ahead with their rights issues within a year from the date of the observations.

Observations by Sebi are conveyed after the regulator seeks any clarifications it requires from the issuer. This basically allows a company to go ahead with its issue but is not a clearance or approval of the issue.

The funds are proposed to be raised for TV18?s acquisition of ETV news and general entertainment channels, except the Telugu GEC from Reliance Industries Ltd (RIL) for Rs 21 billion. RIL will fund the Network18 promoter companies for subscribing to the rights issues and in exchange will get optionally convertible debentures issued by the promoter companies.

The promoter companies of Network18 will need to invest Rs 17 billion to subscribe to their portion of the rights issue. The Network18 group has undertaken to subscribe to any unsubscribed portion of the rights issue in either of the companies.

RIL will lend a minimum of Rs 17 billion in the debentures. If none of the non-promoter shareholders subscribe to the rights issue, RIL will lend Rs 40 billion to Network18 promoters to ensure both the rights issues go through.

Since Network18 owns 50 per cent of TV18, the net capital raised from the rights issues will be Rs 40 billion.

MUMBAI: Raghav Bahl is restructuring his media and entertainment companies under three operational heads as he gears up for expansion after getting Reliance Industries Ltd (RIL) to indirectly invest in it.

Forming IndiaCast, a distribution company that houses content syndication as well, Bahl has got individual heads to shepherd the entertainment, news and distribution businesses that are entering a new growth phase.

Bahl‘s broad plan could be to bring the ETV regional entertainment channels under Viacom18 operational management while its news entities will be under TV18, a source familiar with the development says.

It is not clear yet if this operational structure will be allowed to transition into an equity arrangement. For this to happen, media conglomerate Viacom will have to agree to invest and induct the ETV entertainment channels into the joint venture company, Viacom18, where it holds 50 per cent stake.

"Nothing has been finalised yet. Viacom, no doubt, will be happy to have the regional GECs under Viacom18. A lot will also depend on how RIL wants the structure to evolve. But there are other issues as well," the source says.

As part of the plan to fortify its regional presence, TV18 acquired partial ownership in the broadcasting assets of Eenadu after valuing it at Rs 21 billion. With the purchase, the company has got 100 per cent stake in 5 regional news channels of ETV (where RIL has 100% interest), 50 per cent stake in 5 regional GEC channels excluding Telugu (where RIL has 100% interest) and 24.5 per cent stake in ETV Telugu channels (where RIL has 49% interest). The news channels include ETV Uttar Pradesh, ETV Madhya Pradesh, ETV Rajasthan, ETV Bihar, and ETV Urdu. The regional GECs are ETV Marathi, ETV Kannada, ETV Bangla, ETV Gujarati and ETV Oriya.

The restructuring exercise comes in the wake of these developments and the exit of Haresh Chawla who functioned as Network18 and Viacom18 Group CEO.

"The role of Chawla was too unwieldy as he had full control of all the group companies . After his exit, a restructuring was needed keeping in mind the growth plans," the source explains.

Network18 Group has a combined turnover of Rs 19.52 billion that includes 50 per cent of Viacom18 (Colors, MTV, etc), the news channels under TV18 (CNBC TV18, CNN IBN, IBN7, etc), the web properties and HomeShop18. As the company gears up to launch a Hindi movie channel (put on hold) and regional-language channels, a breakup in roles is the need of the hour.

"It wasn‘t practical for Chawla to oversee the whole of Bahl‘s empire. His operational role at Viacom18 at times was uncalled for and led to a quiet unrest," says a senior executive who has left the company on condition of anonymity.

Bahl Wednesday announced the hiring of Sudhanshu Vats, a senior executive at HUL, as the group CEO of Viacom18 Media. Under
 him will fall Colors, Comedy Central, MTV, Nick, Sonic, Vh1 and Viacom18 Motion Pictures. He has already recruited Anuj Gandhi, an industry veteran, to spearhead IndiaCast‘s growth.

Bahl‘s new structure will mean that the non-ad sales business falls under the care of Gandhi while Vats gets to groom the entertainment networks and Sai Kumar to directly nurse the news and web businesses while continuing his role as Network18 and TV18 Group CEO.

"Earlier, everybody was reporting to Chawla. Now the reality is that each of these lines of businesses need individual management and are too expanded to be operationally under one CEO," the source says.

Take IndiaCast, for example. The new distribution company, under which also resides the syndication business, is already having a turnover of Rs 4.30 billion. Bahl‘s ambition is to scale this up to the size of the biggies, particularly in a digital environment where there is going to be exponential growth in subscription revenues. Zee Entertainment Enterprises Ltd (Zeel) reported domestic subscription of Rs 9.22 billion in FY‘12 and Rs 1.32 billion through other sales and services (syndication sales, playout & transmission services and facility usage income).

Bahl has given IndiaCast a wider playground, bringing under its umbrella content asset monetisation across geographies, platforms and mediums. The other channel distribution companies do not have such a broad canvass and content syndication falls outside their functional zones.

"Bahl believes that IndiaCast has enough leg room to grow and become a Rs 10 billion company over the next few years after digitisation of cable TV spreads," a media analyst at a broking firm says.

Vats will also have his plate full as the group expands its regional footprint and comes out with a Hindi movie channel and other entertainment products that are sure to launch in a digitised environment.

Kumar will have a tough task cut out for him as he tries to beat slow revenue growth for news channels. The web properties will 

also have to be guided to a scale that will make it comfortable for Bahl to tap the American market for raising capital through a public float.

After being rescued from a debt overhang by RIL, Bahl is laying out the new leadership structure that will provide fertile ground for new growth.

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