It is a thumbs down for the $17-billion media and entertainment (M&E) industry. According to exclusive data put together by VCCEdge, of the $64.4-billion private equity and merger & acquisition (M&A) deals that happened across corporate India in 2010, less than one per cent were in the M&E sector. In the years before the slowdown, the figure had gone to over 3.3 per cent of the total flow.
VCCEdge is a data service of VCCircle, a business-to-business firm that provides information, news and data on the investment ecosystem in the country. The data was put together for Business Standard.
Clearly, even if advertisers are back, investors still haven’t recovered their appetite for media and entertainment (M&E) companies. The reasons for the lackadaisical investor interest are not hard to find. The first is the that the performance of the sector has been rather patchy. Except for distribution (films, TV) and publishing, there has been little return on all the capital the sector attracted in the heady days preceding 2008. This shows in the deals that investors seem to prefer even now – most in publishing, TV and film distribution or in interactive media.(Click here for DEAL TRACKER)
Second, scale is still a huge issue. The size of the industry is less than half the size of India’s largest telecom company. Therefore, the average deal size, too, is not attractive, especially for private equity funds. The biggest deal in 2010 was the Blackstone-Jagran one, pegged at $50 million. That is very small when compared to anything else in, say, telecom, pharma or consumer goods. For instance, the biggest deal in 2010 was between Bharti and Zain, at $10.7 billion. Some of the smaller ones ranged between $1 billion and $5 billion.
Third, the really big media deals are not coming into the market. The largest and the most profitable media companies are fighting shy of listing their best assets. So, a Bennett, Coleman & Co Ltd, a Sony Television, a Hindu, an ABP or a Malayala Manorama remains out of bounds — sometimes because regulators block deals (Eenadu), or because owners do not want to give up too much control.(Click here for 2010: DEALS AT A GLANCE)
Whatever the reason, M&E remains on the periphery of investor interest for now. For a sector that represents the power of India’s 300-million-strong consuming classes, that is truly a pity.
