$275 mn for Eenadu group by Blackstone

Deal marks single biggest investment in print media.

In the single-largest investment in the Indian print media, the global private equity investor Blackstone Group today announced that it was investing $275 million (approximately Rs 1,238 crore) in the Hyderabad-based Ushodaya Enterprises, owners of Eenadu and ETV.

This makes Blackstone the first outsider to acquire a stake in the flagship company of southern businessman Ramoji Rao, who also owns Asia's largest studio, the 1,600-acre Ramoji Film City, apart from diversified interests in hotels, foods and financial services. 
 

THE FDI IMPRINT  Other major deals in the Indian print media
COMPANY	INVESTOR	AMOUNT  (in Rs cr)	STAKE  (%)
HT Media	AMP Henderson, Citicorp	117	26
Jagran  Prakashan	Independent News and Media, UK	150	26
Mid-day  Multimedia	T Rowe Price  International	17.95	NA
Business Standard	Financial Times	14.1	13.85
Source: Companies

Eenadu, published from 23 locations, is the largest-circulated Telugu daily and ETV is the country's fourth-largest private TV broadcasting network with 12 channels.

Blackstone will be represented on the Ushodaya Enterprises board against this investment, both companies said in a joint statement today. Neither disclosed Blackstone's shareholding.

Bankers close to the deal, however, said Blackstone would acquire a 26 per cent stake, the maximum permissible limit for foreign investment in the print media.

This puts Ushodaya Enterprises's valuation at $1.05 billion (nearly Rs 4,760 crore).

The transaction is subject to regulatory approval from the Foreign Investment Promotion Board and the ministry of information and broadcasting.

Blackstone's investment is part of Ushodaya Enterprises's plan to raise $ 465 million (nearly Rs 2,093 crore) to finance expansion plans. The group will raise the remaining$190 million (nearly Rs 855 crore) through bank financing.

Kotak Investment Banking acted as the sole investment banking advisor to the transaction.

Ramoji Rao, chairman of Ushodaya Enterprises, said: "The company had access to several financing options, including an IPO. But we decided to go with Blackstone because we believe that at this stage of our growth we have an opportunity to create significant value by leveraging Blackstone's outstanding experience and track record in the global media sector."

Added Akhil Gupta, chairman and managing director of Blackstone Advisors India Private, "We believe that the Indian media sector will be a key beneficiary of a secular trend in growth in personal consumption that is driving India's economic expansion which, in turn, will spur advertising growth. Importantly, we believe that Ushodaya Enterprises is an ideal platform for Blackstone to play this highly attractive sector in India."

This is Blackstone's second largest investment, the first being $50 million in Pune-based Emcure Pharmaceuticals.

Blackstone Group has so far raised more than $75 billion for alternative asset investing, of which over $30 billion has been for private equity investing.

Little is known of the financial strengths of Ramoji Rao's closely-held group. In November 2006, a Congress MP from Rajamundhry, Arun Kumar Vundavalli, demanded a finance ministry enquiry into group company Margadarsi Financiers.

Vundavalli alleged that the loss-making company was raising money from the public to finance other group companies in violation of Reserve Bank norms.

The Andhra Pradesh government subsequently set up an enquiry commission headed by N Rangachari, the former insurance regulator. Ramoji Rao's plea to stay the enquiry was declined by the high court.