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PE investment in media & entertainment declines in 2012, says report

05-February-2013
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PE investment in media & entertainment declines in 2012, says report

The Indian media and entertainment industry is at a threshold to flourish and that’s why FICCI-KPMG Indian Media & Entertainment Industry Report 2012 states that the overall M&E market in India is expected to grow at a compounded annual growth rate of 15 per cent per annum over the next five years, to reach INR 1.4 trillion in 2016.

But when it comes to private equity funds in media, entertainment and publishing sector, it slipped to the tenth position in the top PE sectors of 2012, according to ranking by Grant Thornton in India, an assurance, tax and advisory firm. The sector held eighth position, showing promise and growth, in 2011.

So what has caused the decline? Ajay Shah, Partner – Lead Advisory Services, Ernst & Young stated the reason, “Last year, people were waiting to get more clarity on the distribution side and digitisation. Also, nothing major happened on consolidation side, barring one or two big deals. Hence, in absence of consolidation and big ticket acquisition, PE investments in media particularly have not gone up.”

But one need to also understand that the volume for PE funds in media, entertainment & publishing sector is a mere five per cent of the total pie for 2005 – 2012. Here, IT & ITeS holds the major chunk at 22 per cent, followed by banking and financial services at 11 per cent for the same years, the second edition of Grant Thornton report on Private Equity (PE) and Venture Capital (VC) in India called the ‘The Fourth Wheel’, jointly with Indian Private Equity and Venture Capital Association (IVCA) further revealed.

Darius Pandole, Member of IVCA said “The Indian PE industry is more mature today. Investors have gained from experience, are more cognizant of the risks of doing business in India, and have become better in pricing these risks and working with portfolio companies to add operational value. Entrepreneurs are more aware of the value that PE can provide and of the benefits of working in a symbiotic manner with external investors. This collective experience should lead to improved performance going ahead.”

At this point, Ajay Shah adds about the under-valued M&E sector, “Media by nature has been a very high valued industry but organised money which has come into this industry has not been very significant. So, that probably could be the reason why the volume is so less. Also, there were limited opportunities for investors on where to invest. With digitisation speeding up, we expect PE funds in the sector to pick up this year.”

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