In less than a month, New Delhi Television (NDTV) has struck its second deal, which marks the company’s near exit from the lifestyle and general entertainment channels business and may help address its balance-sheet concerns. Last month, NDTV Networks, which operates in the non-news businesses, sold a 69 per cent stake in NDTV Lifestyle to Scripps Networks Inc at a deal value of $80 million. While NDTV Networks would receive $35 million, Scripps would infuse $20 million into NDTV Lifestyle through a fresh equity issue.
On Tuesday, NDTV entered into a conditional agreement with a Time Warner group company (Turner Asia) to sell its 76 per cent stake in NDTV Imagine (owned by NDTV Networks). Here, NDTV Networks will receive $67 million, while Turner Asia will infuse $50 million for fresh equity.
Analysts say the foreign partnership will help strengthen the content of the two channels, while the cash infusion will provide the much-needed funds for sustaining growth. NDTV is likely to gain in the long-run from the probable appreciation of its minority stakes in the two companies. Importantly, the $102 million of cash inflow will significantly help lower its consolidated debt, as well as fund the purchase of 26 per cent stake in NDTV Networks from NBC Universal.
In a recent report, ICICI Securities analysts have estimated NDTV to possess Rs 136 crore worth of cash (net) as on December 2009, as compared to a net debt of Rs 231 crore as on March 2009.
Meanwhile, even as NDTV has been able to control cost in its news channel business, resulting in its standalone losses halving year-on-year in the September 2009 quarter, revenues were down 6.2 per cent due to a decline in advertising income.
Going ahead, although the expected de-leveraging of balance-sheet and exit from loss-making businesses are some positives, with competition intensifying in the news segment, especially in business news, analysts expect the profitability of the news business to remain under pressure.
