Decoding the amalgamation schemes at Network18 and TV18

Decoding the amalgamation schemes at Network18 and TV18

Author | Saif Ahmad Khan | Friday, Feb 24,2017 9:01 AM

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Decoding the amalgamation schemes at Network18 and TV18

On January 14, the board of directors at both Network18 Media & Investments Limited and TV18 Broadcast Limited approved an ambitious scheme of amalgamation. Network18 Media & Investments Limited, the group’s holding company, will take within its fold 14 subsidiary companies that are wholly owned by it either directly or indirectly. TV18 Broadcast Limited, a subsidiary of Network18 Media & Investments Limited, will also amalgamate 4 companies. Subject to the approval of government authorities, the appointed date of both the amalgamations is April 1, 2016.

Rationale behind the amalgamation

The rationale behind both the amalgamations is to reduce the number of legal entities and save costs. “(It is) in order to consolidate and effectively manage the transferor companies and the transferee company in a single entity, which will provide several benefits including synergy, economies of scale, attain efficiencies and cost competitiveness,” said Network18 Media & Investments Limited and TV18 Broadcast Limited in separate filings to the stock exchange.

Additionally, TV18 Broadcast Limited’s amalgamation scheme will enable it to successfully integrate the various news channels falling under the purview of business, English, Hindi and regional broadcasting. The belief is that the amalgamation will “result in maximising overall shareholder value” for the company, said the stock exchange filing.

Opining that “most news media companies are not in profit”, Arun Sharma, Senior Vice President at Lodestar stated that the media industry is suffering on account of “spiralling costs”. Stressing that the media industry is getting quite aggressive nowadays, Sharma hailed Network18 group’s scheme of amalgamations as a smart move. “I think it will help in bringing in synergy and increase in the response time. The third benefit is huge saving of costs,” he said.

Financials involved

An important aspect of the amalgamations is the scale of the companies involved. Alok Bansal, Co-founder & CFO at Policybazaar explained that in the course of expanding a business, one ends up creating multiple legal entities, which results in splitting of revenues and costs. “If you bring the businesses under the roof of one legal entity then you are able to consolidate profits/losses,” Bansal said. He added that it enables cleaning up of the balance sheet and easier company understanding for the market.

At the end of the fiscal year 2015-16, Network18 Media & Investments Limited’s net worth stood at Rs 2623.36 crore. Some of the biggest companies in terms of revenues who are slated to amalgamate with Network18 Media & Investments Limited are Colosceum Media Private Limited, Digital18 Media Limited and Capital18 Fincap Private Limited.

As of March 2016, Colosceum Media Private Limited’s net worth is valued at Rs 15.22 crore, and Capital18 Fincap Private Limited at Rs 17.32 crore. The financials of the other companies can be found below:

Being the cash cow of the group, TV18 Broadcast Limited is the anchor of the second amalgamation. Known for forging foreign tie-ups with companies such as Viacom and CNN, TV18 Broadcast Limited ended the last fiscal on a strong footing with over Rs 650 crore in revenues. 

The company’s net worth was above Rs 3,600 crore in March 2016. Transferor companies are quite rich too with Equator Trading Enterprises Private Limited’s valuation being close to Rs 200 crore. Panorama Television Private Limited’s net worth at the end of the previous fiscal was Rs 101.65 crore and it generated Rs 241.73 crore in revenues.

When asked about the likely impact on the valuations of the holding company as a result of the amalgamation, Bansal said, “The market will reward with a premium.” 

Background of companies

As far as the amalgamation of 14 subsidiary companies into Network18 Media & Investments Limited is concerned, 1/3rd of the transferor companies are of foreign origin. They are “situated in Mauritius” and “engaged in the business of investing in media and digital business”, said the stock exchange filing. These companies are E-18 Limited, Network18 Holdings Limited, Television18 Mauritius Limited, Television18 Media and Investments Limited and Web18 Holdings Limited.

Another four, namely, RRB Investments Private Limited, RRK Finhold Private Limited, RVT Finhold Private Limited and Setpro18 Distribution Limited have similar mode of operations. They are engaged in “investment, trading and commercial services” business. The remaining five have slightly distinct interests.

While Colosceum Media Private Limited is into the creation of multimedia assets and content development for films, Capital18 Fincap Private Limited is more concerned with financial operations and trading. Both Digital18 Media Limited and Reed Infomedia India Private Limited are in the realm of publishing magazines. The one company left is an e-commerce property called Web18 Software Services.

TV18 Broadcast Limited’s scheme of amalgamation involves only four companies. Mauritius-based investments and consulting firm ibn18 (Mauritius) Limited is the sole foreign entity. Equator Trading Enterprises Private Limited, the holding company of Panorama Television Private Limited, along with Panorama itself is part of the amalgamation. Panorama’s business revolves around broadcast of regional general news channels. The fourth company which has multiple interests besides broadcasting and commercial services is RVT Media Private Limited.

Claiming that everyone is looking towards consolidation, Amita Karwal, COO, Vizeum India (North & South), said, “There is a lot of unpredictability in the market. Companies have built these large networks with several skilled people. They are now scaling down.” She maintained that this pattern was on show across industries including e-commerce and news media, especially print.

She recalled that once Hindustan Times had got into a sort of “memorandum of understanding” with The Hindu and ABP to counter The Times of India. They resolved to work around their strengths and weaknesses but the exercise turned futile as it was unable to cut costs by reducing the number of people involved in the operations. Terming the outline of the schemes of amalgamation at Network18 Media & Investments Limited and TV18 Broadcast Limited as “sketchy”, she stated one cannot predict its definitive impact at this stage.  

Controlled by Mukesh Ambani, the financials involved in the schemes of amalgamation at Network18 Media & Investments Limited and TV18 Broadcast Limited are a reflection of their scale of business and an overall desire to manage the costs and assets of the media group more effectively.

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