India's media sector saw a major deal in the New Year with Reliance Industries (RIL) and Network 18 groups joining hands today and experts said that more moves to consolidate the segment are expected in the coming months.
Under the deal, the Mukesh Ambani-led giant RIL will sell a part of its interest in Eenadu TV channels to Network 18.
Through an independent trust, RIL group will also provide funding to promoters of Raghav Bahl-led Network 18 group for acquiring shares in Network 18 and TV18 via rights issues.
The move will give RIL a huge exposure across businesses -- TV, Internet, e-commerce, magazines, mobile content.
"The Reliance-Network 18 deal is a fairly large deal and one of the biggest in the media sector. This is a win-win situation for both parties involved," said Srividya CG – partner and practice leader (valuations) at Grant Thornton.
"The year has started on a bullish note and going forward a lot of consolidation is expected in this sector," he added.
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Last year, there were close to $700 million worth of deals in the media sector between M&A and private equity.
According to Grant Thornton, deals in the media, entertainment and publishing industry are on an uptrend trend -- both in terms of value as well as numbers.
In 2010, there were 33 M&A deals worth $159 million, which increased to $385 million through 38 transactions.
The segment also attracted private equity transactions and 2011 saw 16 deals worth $319 million, a significant jump from 2010, when there just 4 PE deals worth $69 million took place.
Experts said several media companies have been facing cash crunch in the past 2-3 years and broadcasters such as Network 18, NDTV, Zee have been undergoing restructuring.
"This deal can mark the beginning of consolidation in the media field. One can expect more deals in the industry," said SMC Global Securities Strategist Jagannadham Thunuguntla.
However, Avinash Gupta, Leader, Financial Advisory, Deloitte said, "Chances of consolidation within the players in the segment are very much there...Possibility of consolidation with the help of foreign strategic investors are there as well. But not of consolidation by a new corporate [as was the case in the RIL-Network18 deal]."
Industry experts were also of the view that there are not many corporates sitting on a pile of cash, wanting to venture into new businesses in the current economic environment.
RIL is unique in this aspect as it has got around $12-13 billion cash and has always said it is looking for investments, said an expert.
"The way it is structured, the deal looks positive for both entities with RIL getting access to content for its 4G foray and TV18, a solution on its expanding debt as well as an entry into the regional broadcasting space," said PwC India Executive Director - Leader Entertainment & Media Practice - Timmy S Kandhari.