Industry shows revival signs as firms start raising money again.
It has been raining deals. Subhash Chandra’s Dish TV sold an 11 per cent stake to US-based asset management firm, Apollo Management, for $100 million early this week. Ajay Bijli’s PVR bought out DLF’s DT Cinemas in a $12 million deal and Prannoy Roy’s NDTV sold a 69 per cent stake in its lifestyle channel to the US-based Scripps Networks Interactive for $55 million earlier this month. Sameer Manchanda’s Den Networks wrapped up its Initial Public Offer (IPO) raising about Rs 500 crore for its cable business.
Is life back on track for India’s $17-billion media and entertainment (M&E) industry? It would seem so going by the numbers — on deals and the amount of money being raised. According to VCCEdge, the research arm of VCCircle, M&As (mergers and acquisitions) and private equity deals in the media and entertainment sector have been rising steadily in value and volumes in the last five months. They were up from 11 deals amounting to $150 million in the first half of 2009 to 13 (worth $305 million) in the second half (see chart). These included deals in advertising, cable and satellite, publishing, broadcasting, films and online media.
“There is a positive change in mood,” said Salil Pitale, head of media and telecom, Enam Investment Banking. There certainly is. There are two more media IPOs (DB Corporation and Hathway Cable) around the corner. Many cable and TV distribution companies are in active talks with private investors. At least one mid-sized TV content company in Mumbai is actively scouting for a private equity investor. At an industry conclave in Chennai recently, the investment banking and private equity community was out in significant numbers.
It is time then for Indian M&E firms to heave a sigh of relief. The global slowdown post Lehman Brothers collapse in September 2008 spelt doom for the Indian media and entertainment industry, especially in the second half of 2008 and first half of 2009. Even as ad revenues dipped (growth rate was down from 20 per cent to 15 per cent), many fund raising moves dried up midway.
All the term sheets and MoUs amounted to nothing once the slowdown began. Most big primary issues were held back, notably DB Corporation.
This put several businesses that were in start-up mode in a tight spot. They had done the setting up, but had no money to run the businesses without equity funding. Some raised debt at a high cost; others shut down or went slow on new ventures.
Sakal, a Marathi newspaper, shut down its Delhi office within a few months of setting up shop in the city for its English paper and TV businesses. Across the board there were salary cuts and layoffs as advertisers started beating down rates.
| MOOD TRACKER | ||||||
| Period | M&A | Pvt equity | Total | |||
| No of deals | Deal value# | No of deals | Deal value# | No of deals | Deal value# | |
| First half ‘08 | 20 | 557.16 | 20 | 232.96 | 40 | 790.12 |
| Second half ‘08 | 12 | 133.95 | 15 | 119.3 | 27 | 253.35 |
| First half ‘09 | 8 | 73.17 | 3 | 77.11 | 11 | 150.28 |
| Second half ‘09* | 8 | 124.5 | 5 | 181.31 | 13 | 305.81 |
| * upto Nov 23 # in $ millions Source: VCEdge Data refers to M&A and private equity deals in advertising, broadcasting, cable & satellite, films, online media and publishing | ||||||
This was in complete contrast to the mood early 2008. Consider that the sector saw a total of 40 private equity and M&A deals totalling $790-odd million in the first half of 2008. This fell to 27 deals worth $253 million in the second half and finally crashed to just 11 deals worth $150 million in the first half of 2009.So the current uptick is welcome. There is, however, one difference between the last spurt of investments and this one; most seem to be strategic like PVR-DT or (as Pitale puts it) quasi-strategic like Dish-Apollo.
Most of the investments are coming in at the retail end of the business (cable, DTH, multiplexes), so its impact on growth and topline will be almost immediate as the retail end captures the revenue first before passing it down the value chain. It also creates much needed media infrastructure, a process that had stalled with the slowdown.
