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Network18’s rights issue signals co’s ‘third breath’

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Network18’s rights issue signals co’s ‘third breath’

Network18 is poised for its next level of growth. While the company has taken some significant steps in this direction already, a key step is to float rights issues for Network18 and its company TV18. The rights issues have a two-way purpose. First is completion of the transaction with the recently announced acquisition deal with Eenadu, which would ensure that sans sports, Network18 had its tentacles across key genres on television. Second is the paying off of debts of both Network18 and TV18, that would save the company a substantial amount that is being paid by way of interest.

The rights issues, essentially designed with the objective to reward investors who have backed the Network18 Group for all these years (much of which can be termed as a tough period), have been approved and announced. While the funds that would be generated by the TV18 rights offering would be used towards completing the ETV Group transaction, the funds raised from both Network18 and TV18 would also be used to clear off the debts.

For the record, the Network18 rights issue comprises the issue of 899,873,930 equity shares with a face value of Rs 5 each for cash at a premium of Rs 25 per equity share for an amount of Rs 26,996.22 million. Issue opens on September 18, 2012 and closes on October 4, 2012. The basis of allotment is on a rights basis to existing equity shareholders of the company, in the ratio of 307 equity share(s) for every 50 fully paid-up equity share(s) held on the record date, September 12, 2012.

The TV18 rights issue on the other hand will see issue of 1,349,577,882 equity shares with a face value of Rs 2 each for cash at a premium of Rs 18 per equity share for an amount of Rs 26,991.56 million. The issue opens on September 25, 2012 and closes on October 15, 2012. The basis of allotment here is defined on a rights basis to existing equity shareholders of the company, in the ratio of 41 equity share(s) for every 11 fully paid-up equity share(s) held on the record date, September 17, 2012.

Raghav Bahl in conversation with exchange4media...
As Network18 steps into the next phase of its growth, the company’s Founder and Managing Director, Raghav Bahl speaks to exchange4media on what the rights issues essentially mean for the company, and what are the steps ahead for Network18, and its companies, in what appears to be the ‘third phase of growth’.

The company has been using the term Network18 3.0 to define the phase it is headed into. Why would you call it a ‘3.0’ avatar?
I honestly believe that we are in our third breath. The first breath was setting up the company, which one would say we did till about 2005. The second breath was the expansion between 2005 and 2012 but that also came with the attendant problems of extra-debt and balance sheet stress. Now in this stage, I believe it is literally the third breath in which we have a structure optimised for growth and post the rights issue and the Scheme of Arrangement aimed at a stronger balance-sheet we have a charted path to move ahead. We believe that, as ‘digital’ and addressability become defining trends for the industry, both in broadcast and other media, our assets and brands are well-positioned in many regards.

Repayment of debts means saving approximately Rs 300 crore a year – how do you intend to utilise this?
The rights issue will help us substantially reduce our debt and cement our foray into growing regional markets. This naturally will strengthen our position significantly. As far as interest saving is concerned, our belief is that a stronger value creating company will and should accrue to the benefit of our shareholders.

What would be the impact of this consolidation phase on your employees?
Network18, despite all troubles, was always clear that employees should not suffer too much. Psychologically, it is damaging to listen to the rumours all around but we made sure that they were working in a fair environment. Even in the worst times, we launched channels and that too with leadership stance. Employees through the bad times were shielded. Having said that, the time is for them to start getting used to a company which is again going to be seen as valuable, doing cutting edge things that brings its own rewards. They would be part of wealth generation but the message I hope everyone understands is that our priority has to be the shareholder because it is the shareholder who has seen his wealth deplete so enormously in the last few years. The shareholders have seen wealth erosion and they need to see wealth accretion. The employees would certainly and happily ride this upswing with the company’s owners.

Final question, from a partner point of view, what should Network18 3.0 mean?
They can look forward to a lot more action. Network18 3.0 in essence implies a stronger company with more synergies and market leverage. These benefits will also accrue to our strategic ventures naturally. Across our partnerships including Viacom18, A+E Networks|TV18 and others, the team is focused on building and deepening their portfolios and Network18 3.0 will help them realise those goals.

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