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Reliance Industries (RIL) today announced part sale of its interest in ETV’s
channels. While the company’s press release mentions its investments in
ETV channels at INR26bn, we believe the equity investment may have
been consummated recently as the same is not a part of RIL’s FY11 annual
report. RIL’s trust will fund the promoter subscription to the rights issue
of Network 18 and TV 18. Also, RIL’s subsidiary Infotel Broadband has
entered into a MoU with TV 18 and Network 18 for preferential access to
content to be distributed via the planned BWA launch.
Pre‐deal investment in ETV
While RIL’s annual reports do not have any reference to investments in ETV, as per the
company’s release today, it has invested INR26bn in the same. Pre‐deal, RIL held: (a)
100% in regional ETV news channels; (b) 100% in ETV’s non‐Telugu GEC channels; and
(c) 49% in ETV Telugu channels.
What’s the deal about?
RIL receives up to INR21bn for partial stake sale of the following to TV18: (a) 100% in
regional ETV news channels; (b) 50% in ETV’s non‐Telugu GEC channels; and (c) 24.5%
in ETV Telugu channels. TV18 also has the option to buy RIL’s balance stake. To fund the
acquisition and repay debt, Network 18 and TV18 have approved rights issues of
INR27bn each. This requires promoters (of NW18 and TV18) to invest INR19‐40bn,
depending on the success of the rights issue, whereas current promoter holding in the
two companies is ~INR5.0bn. RIL will set up a trust, Independent Media Trust (IMT),
which will invest in Optionally Convertible Debentures of the promoter group
companies (of NW18 and TV18), effectively funding entire rights of the promoter.
RIL benefit: Preferential access to content to boost BWA roll out
Assuming most of the value to be contributed by GEC channels, we estimate the value
of RIL’s pre‐deal holding in ETV at INR37‐40bn. RIL will get preferential access to nearly
25 channels and web content of Network 18, and allow it to roll out its BWA networks
faster. This is in line with its strategy of acquiring content. Moreover, this will free up
management bandwidth, given that it will be handled by the existing management of
Network 18 and TV 18. However, we remain uncomfortable on small ticket deals in
non‐core areas. We maintain BUY recommendation.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Industries (RIL) today announced part sale of its interest in ETV’s
channels. While the company’s press release mentions its investments in
ETV channels at INR26bn, we believe the equity investment may have
been consummated recently as the same is not a part of RIL’s FY11 annual
report. RIL’s trust will fund the promoter subscription to the rights issue
of Network 18 and TV 18. Also, RIL’s subsidiary Infotel Broadband has
entered into a MoU with TV 18 and Network 18 for preferential access to
content to be distributed via the planned BWA launch.
Pre‐deal investment in ETV
While RIL’s annual reports do not have any reference to investments in ETV, as per the
company’s release today, it has invested INR26bn in the same. Pre‐deal, RIL held: (a)
100% in regional ETV news channels; (b) 100% in ETV’s non‐Telugu GEC channels; and
(c) 49% in ETV Telugu channels.
What’s the deal about?
RIL receives up to INR21bn for partial stake sale of the following to TV18: (a) 100% in
regional ETV news channels; (b) 50% in ETV’s non‐Telugu GEC channels; and (c) 24.5%
in ETV Telugu channels. TV18 also has the option to buy RIL’s balance stake. To fund the
acquisition and repay debt, Network 18 and TV18 have approved rights issues of
INR27bn each. This requires promoters (of NW18 and TV18) to invest INR19‐40bn,
depending on the success of the rights issue, whereas current promoter holding in the
two companies is ~INR5.0bn. RIL will set up a trust, Independent Media Trust (IMT),
which will invest in Optionally Convertible Debentures of the promoter group
companies (of NW18 and TV18), effectively funding entire rights of the promoter.
RIL benefit: Preferential access to content to boost BWA roll out
Assuming most of the value to be contributed by GEC channels, we estimate the value
of RIL’s pre‐deal holding in ETV at INR37‐40bn. RIL will get preferential access to nearly
25 channels and web content of Network 18, and allow it to roll out its BWA networks
faster. This is in line with its strategy of acquiring content. Moreover, this will free up
management bandwidth, given that it will be handled by the existing management of
Network 18 and TV 18. However, we remain uncomfortable on small ticket deals in
non‐core areas. We maintain BUY recommendation.
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