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NDTV approves sale of Ethnic & Lifestyle Holdco

11-May-2017
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NDTV approves sale of Ethnic & Lifestyle Holdco

In a meeting held on May 5, the board of directors at NDTV approved the sale of equity stake possessed by its material subsidiaries in NDTV Ethnic Retail Limited and Lifestyle Holdco. The buyer of both stakes is a company called Nameh Hotels & Resorts Private Limited. Subject to the approval of shareholders, the first deal is expected to close within 90 days of the agreement whereas the formalities involved in the latter case should be completed by the end of 60 days.

Industry sources told exchange4media that NDTV’s biggest problem is their inability to rein in expenditure. While their “business is fine” in terms of revenues given their broadcast ratings, they are “perpetually in loss” owing to the high input costs. In the absence of operating profits, they have accumulated a lot of debt over a period of time. “They will have to obviously sell assets to make up for the debt,” said a media planner. 

Through the combined share of NDTV Lifestyle Holdings Limited, NDTV Convergence Limited and NDTV Worldwide Limited, NDTV controlled “99.92 per cent of the total issued, subscribed, and paid-up equity share capital” of NDTV Ethnic Retail Limited. Nameh Hotels & Resorts Private Limited will spend Rs. 3.65 per equity share to acquire Ethnic. NDTV Networks’ equity stake, which is 2 per cent of the equity share capital of Lifestyle Holdco, is being sold at Rs. 17.72 per equity share.

“Pursuant to the completion of the aforementioned stake sale by Networks (NDTV Networks Limited) to the purchaser (Nameh Hotels & Resorts Private Limited), the company (NDTV) will cease to exercise control on Lifestyle Holdco and its subsidiary i.e. NDTV Lifestyle Limited,” said the company, while briefing the National Stock Exchange. The move came a week before the board was scheduled to meet on May 12 and approve the financial results for the fiscal year ended March 31, 2017. On April 17, NDTV had intimated the stock exchange that its board was going to consider the sale of certain strategic assets, which necessitated the closure of the trading window.

The quarterly results of the previous fiscal were quite forgettable for NDTV. From April 1–December 31, 2016, the company generated Rs. 368.32 crore in revenues. On a comparative basis, the income was cut down by Rs. 27.71 crore or 6.99 per cent. For the same period during the fiscal year ended March 31, 2016, NDTV’s revenues stood at Rs. 396.03 crore. To make matters worse, NDTV’s total expenditure of Rs. 426.88 crore ensured that the company sustained a loss of almost Rs. 60 crore. “They have always been a laggard compared to their peer group,” added a source, claiming that listed television news companies like TV Today and ZMCL have managed profits as opposed to the trend witnessed at NDTV over several years.

While taking over the reins of the company from Vikram Chandra in November 2016, NDTV Group CEO KVL Narayan Rao had promised to ensure the “financial turnaround” of the company by delivering both in terms of top line and bottom line growth. After a weak showing in the first two quarters, the leadership was optimistic about improving its performance on the back of the festive season during the latter half. It was asserted that the losses were bound to go down since 60 per cent of the revenues are generally collected during quarters three and four.

However, the demonetization of high currency notes shattered those assumptions. After the postponement and cancellation of purchases from the side of advertisers, NDTV embarked on a two-pronged strategy to curb expenses and bolster revenues. From the standpoint of income, NDTV chose to primarily rely on money brought in via channel sponsorships. On the other hand, they decided to experiment with mobile phones for filming footage during the assembly elections in February and March. The intent was to reduce the costs involved in shooting with expensive broadcast cameras and related manpower requirements.

The complete picture concerning NDTV’s financial performance during the last fiscal will emerge only when its board approves the financial results later this week. 

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