IDFC research: buy IBN18

Viacom18 (a 50:50 JV between IBN18 and Viacom) has made an offer for acquisition of The Indian
Film Company (TIFC), a film fund listed on the AIM Stock Exchange where Network18 owns 80.4%
stake. Viacom18 has valued TIFC at GBP63.6m (or at 115.56 pence per share), which is 1x the total
capital deployed in TIFC. With Viacom18 proposing to launch a movie channel post this acquisition,
IBN18 (or the New TV18) would join the league of larger networks such as Star and ZEE.
􀂉 Details of the transaction:
Valuations – no surprises!
• TIFC is a film fund listed in AIM (current market capitalization of GBP21m), where Network18
owns 77%, Viacom 4.5% and another 3.45% is owned by BK Media (a wholly owned company of
Raghav Bahl). As a part of the restructuring exercise of Network18 Group in July 2010, the
management had indicated likely transfer of their 80.4% stake in TIFC to Viacom18 for an
estimated consideration of GBP50m-55m (thereby entailing a value of ~GBP64m to TIFC).
• On expected lines, Viacom18 has made a bid for TIFC to acquire 80.4% stake (Network 18 + BK
Media ownership) for a consideration of GBP51m and follow it with an open offer for the
remaining ~20% stake. Minority shareholders include HSBC, Altima Partners, Kellusa, etc. The
transaction values TIFC at GBP63.6m (or USD100m).
• In addition, the investment management firm which managed the AUM of TIFC will also be
folded into Viacom18 for a consideration of USD0.5m. The investment manager firm, which is
entitled to 1% of the film funds as management fees (2% earlier), has a 50% ownership of
Network18. There remains ambiguity with regards to the ownership of this management firm as
indeed the need for a separate investment managers.
TIFC – Financial details
• We analyzed the FY10 Annual report of TIFC to understand the proportion of the total capital
deployed in the company which is ‘monetizable’. Of the total BS size of GBP63.6m of TIFC,
GBP45.9m is in the form of movie assets. Of this, GBP30m are related to movies which have been
released over a year back (implying 60% of the cost amortized) and GBP16m relates to movies
currently under production.