Network18 Group - Dec08(QA)

8/8/2019 Network18 Group - Dec08(QA)

1/23

Network18 Group

Q & A

Nikhil Vora / Bhushan Gajaria

(M) +91 9821132471 / 9821987091(Dir) +91-22-6638 3308 / 3367

[email protected] /

[email protected]

December 2008

Raghav Bahl (Group Chairman)

Haresh Chawla (Group CEO)

Sameer Manchanda (Jt. MD, IBN18)


2/23

2

A Q&A session with the Management

Qs?1. Group holding structure and intergroup ownership

2. Capital infused in each of the businesses by the holding company

3. TV181. Operational update

2. Balance sheet status & funding requirement

3. Segmental financial snapshot

4. IBN181. Operational update core news operations; Colors & other Viacom18 properties

2. Viacom18 funding requirement

3. IBN18 balance sheet & funding requirement4. Segmental financial snapshot

5. HomeShop18

6. Queries on other group ventures and investment arms


3/23

3

1. Group holding structure

Raghav Bahl / Other promoters

TV18 IBN18

Network18India Holdings

IFC

Network18Holdings

HomeShop18SetPro

18.0%

51.8%

49.3% 66.0%29.3%

TV18 + Awaaz

Web18

Newswire18

Infomedia

Forbes

CNN IBN/ IBN7

Viacom18

IBN Lokmat

Colors

MTV

Vh1

Nickelodeon

Studio18

13.5%

100%

86.5%

70.0%

44.0%

100.0%

50.0%

50.0%

65.0%

21.2%

3.0%1.7%


4/23 4


309

5.0

61.8

12.2

36.0

51.8

1.2

50.6

Network18

599

5.0

119.9

18.2

30.8

51.0

0.2

49.3

1.5

TV18

8.4Foreign Investors

4.0Gupta Family (Jagran)

4.9Treasury Stock

181.7Total Number of Shares (m)

2.0Face Value (Rs)

363.4Total Equity Capital (m shares)

Domestic Others

Total promoter holding (%)

Other Promoter group/ Management

IBN18

TV18

Network18

Raghav Bahl

Holding (%)

33.2

50.5

21.2

29.3

IBN18 (post IBN7 Merger)

IBN18 equity capital is post merger of IBN7, QIP and warrant issuance to TV18


5/23 5


TV18 owns 21.2% in IBN18 post the issuance of 15m warrants

convertible at Rs102 per share (done recently)

IBN18 includes 16.3m shares to be issued on merger of IBN7. Around

9m shares (equivalent to IBN18s existing 55% stake in IBN7) to remain

as treasury stock

TV18 bought 40% in Infomedia from ICICI Ventures + 3.65% acquiredthrough open offer; also has 5m warrants in Infomedia (likely to lapse)

13% stake in Web18 owned by Tracer Capital & couple of other

investors - bought over by TV18 at Rs1.6bn; too steep a price for a

reported investment of less than Rs0.5bn!


6/23 6

2. Capital employed by holding companies

Companies underNetwork18

Acquisition + Open Offer200178044Infomedia18

21.2

70

86.5

100

65

18

66

29.3

49.3

% holding

Scheme of demerger

55

Scheme of demerger

1,696

807

50

197

Scheme of demerger

Initial capital(Rs m)

1,530

80

750

1,142

1,990

Fund infusion(Rs m)

Remaining 13.5% with IBN 18Web18

Acquired from CRISIL Market WireNewswire18

15m warrants issued @Rs102 per shareIBN18

Companies under

TV18

Network18 India

Holdings

HomeShop18

IFC

SetPro

IBN18

TV18

Companies

Investment arm

SAIF Partners controls the remaining

through a convert structure

Listed at AIM

Remaining stake with Sameer Manchanda

and Raghav Bahl

Conversion of 5.5m warrants out of the total15m warrants at Rs177.6

Conversion of 5m warrants at Rs398/ share

Remarks


7/23 7

3.1. TV18 Operational update

Core news broadcasting operations Near-term growth under pressure given the ongoing capital market turmoil;

slowdown in IPO/ NFO and BFSI advertising

Likely decline in revenues in Q4FY09 as Parliament elections due in April/ May;

therefore, Union Budget only in Q2FY10

News business growth at ~8%; margins at ~35% in FY09E

Key monitorable - Business news channel by ET, likely launch in Q1CY09

Potential to generate Rs1bn+ pay revenues; but a long-term growth propeller

Web18

~70% of revenues from moneycontrol.com (in the financials vertical) at risk

in.com the recently launched horizontal portal to be the driver property; notably,Rediff.com, Indias largest horizontal portal, has revenues of less than USD30m

All the launch expenses on in.com charged off through P&L

Expect revenue growth of ~35% in FY09; Losses similar to that in FY08


8/23 8

3.1. TV18 operational update

Infomedia18 Acquired a 44% stake in Infomedia for Rs2.2bn

Key growth driver business directory; Leverage Yellow Pages on internet

(yellowpages.in) and voice (recently acquired Ask Me services)

Leverage business magazines like Overdrive on TV and internet

Plans to hive off printing facilities and outsourcing business

Revenues likely to decline in FY09; we see losses even at operating level

Unlikely to exercise warrant conversion as conversion price at 3x the CMP; 51%stake not mandatory (TV18 has management control with a 44% stake)

Print Media

Launch of business news magazine with Forbes by March09; total investment ofRs250m

Launch of pink paper delayed vernacular newspaper with Jagran Prakashan and

English newspaper with an international brand

Open to entry through the acquisition route


9/23 9

3.2. TV18 - Funding growth

Funding requirement

Rs1.5bn to increase stake in IBN18

Rs600m of cash loss in Web18,

Newswire18 and Infomedia

Rs1.2bn for conversion of warrants

in Infomedia (unlikely to convert)

Rs250m on Forbes magazine

Rs1bn of working capital funding

Rs400m towards strategic media

investments

Total minimum capital requirement

of Rs4bn

Current balance sheet

Current debt - Rs9bn (Rs6.5bn long-term)

Current cash on books of Rs4.5bn

Gearing of 1.2

Funding and deleveraging options

Cash profit of Rs1bn from news

operations Rs2.75bn to be received from IBN18 as

IBN18 exercises its option of acquiring

50% stake in Viacom18

Release funds in Infomedia by sale of

printing press and outsourcing operations

Plans to list/ Strategic stake sale of

Web18


10/2310

3.3. Financial performance

388

(52)

(71)

(387)

870

Net Profit/ loss

6,015

1,450

243

741

3,582

Revenues

FY09E

3,987

1,862.2

116

545

3,323

Revenues

FY08

957

95.7

(98)

(318)

1372

EBITDA

681

(218)

(63)

(299)

1,260

EBITDA

TV18 Consolidated

Infomedia18

Newswire18

Web18

TV18 - news operations

(Rs m)

Company

25

(141)

(79)

(408)

653

Net Profit/ loss

Infomedia18 transaction completed in FY09; hence not included in FY08 numbers


11/231

4.1. IBN18 Operational update

CNN IBN Closely fought battle with Times Now and NDTV 24x7 in English news genre

Rs1.3bn of revenues growing at 20%yoy and profitable; share of pay revenues still

insignificant

IBN7 IBN18 owns 55% stake in IBN7 (45% with Jagran Group promoters); IBN7 to be

merged into IBN18

A laggard with ~10% market share in the cluttered Hindi news genre

Revenues of Rs533m and losses of Rs267m in FY08; expected to grow at 35% andnearing breakeven

IBN Lokmat

Marathi news channel - a 50:50 JV with Lokmat, leading Marathi print play

Operating cost structure of Rs200m-220m; revenues beginning to flow in

Likely to incur Rs80m-100m of losses in FY09

Plans to add a few more regional news properties

~Rs400m being spent on carriage fees


12/2312


Colors A strong No.2 in GEC, headed towards leadership A clear number 2 player in the GEC space 225+ GRPs; next only to Star

Reached number 2 slot within two months of launch - a first in the global broadcast

history

Occupies all the 5 top slots & 9 of the top 20 slots Unlike broadly perceived, GRPs coming from daily shows Balika Vadhu & Jai Shree

Krishna; Big Boss & Fear Factor just created visibility

Overall GRP Share Top Content Ratings

GRPs - Overall

0

80

160

240

320

Star Plus Colors Zee Sony Star One NDTV

Imagine

9X Sahara

One

SAB

3Sony

Star One

NDTV Imagine

Colors

Zee

Star Plus

No of shows

9

1

10

Top 20 Top 100

1

4

26

31

35


13/23

13


Colors Revenue curve to follow viewership gains

Ad rates beginning to track viewership share - rack rates moving closer to Star &

Zee; distribution revenues to flow in from year-2

Pre-booked inventory sales at just 20% - risk paid off well

Current run rate of Rs250m of ad revenues per month

Distribution revenues to flow in from FY09; in FY10, distribution revenues expected

to be 1/4th that of Zee despite 1.25x viewership that of Zee

High spending on launch marketing (~Rs750m) and carriage (~Rs1bn)

Content cost in line with peers

Expected breakeven in FY10

l d


14/23

14


Viacom18s other properties MTV, Nickelodeon & Vh1

Revenues exceeded Rs1bn in FY08 and EBITDA of Rs127m

MTV the leading music channel; plans to reposition itself as youth-based general

entertainment channel

Nickelodeon is already number 2 kids entertainment channel (~20% market share)

Vh1 the only international music channel

25% CAGR in business operations over FY08-11E

4 2 F di f Vi 18


15/23

15

4.2. Funding of Viacom18

Viacom brings in MTV, Vh1 and Nickelodeon @ pre money valuation ofUSD90m

Terms of infusion by IBN18

USD50.5m upfront payment (funded by TV18)

USD40m in 3 tranches of warrant conversion (15+15+10) over 3 years

Incremental capital on call by both the parties Rs600m infused so far,incremental Rs1bn to be infused

Currently Zero Debt company estimated to raise up to USD25m-30mof working capital funding

Funding requirement USD150m

USD 25m-30m on capex of Colors

USD 85m-90m of cash loss funding till Colors turns profitable

USD 25m-30m of working capital funds

4 3 F di f IBN18


16/23

16

4.3. Funding of IBN18

Funding requirement

Rs2.75bn to repay TV18 for

funding its share of Viacom18

Rs2bn (USD40m) to fund

warrants in Viacom18; USD15m

required upfront

Rs500m (USD10m) to fund

Viacom18 on incremental call

Total minimum fund requirement

Rs5.25bn

Mode of funding

Cash on books of Rs250m and

debt of Rs1bn

Rs1.14bn raised through current

QIP at Rs102 per share

Rs1.5bn raised through warrant

issuance (15m) to TV18

Incremental debt issuance of

Rs1bn with enhanced net worth

4 4 IBN 18 Fi i l f


17/23

17

4.4. IBN 18 Financial performance

3,877

2,811.8

1,663

1,458.0

2,314.0

30.0

720.0

1,564.0

Revenues

(1,399.6)

(2,730.1)

141.4

(2,879.0)

(30.0)

(140.0)

(20.0)

130.0

EBITDA

(68.7)124.51,350.9CNN IBN

(267.2)(177.4)550.7IBN7

IBN Lokmat

(320.3)(335.9)(52.9)1,901.6Total news operations

(3,189.0)Colors

12.3(0.4)127.01,027.0Viacom18 - others

(3,159.2)(0.4)127.01,027.0Non-news operations

(2,203.9)IBN18 Consolidated

Net Profit/ LossNet Profit/

LossEBITDARevenues

(Rs m)

FY08Company FY09E

Viacom18, Colors & IBN Lokmat Consolidated numbers account for only the 50% share held by

IBN18; Consolidated numbers also include additional debt of IBN18 to fund Viacom18

Viacom18 transaction completed in FY09; hence not included in FY08 numbers

5 H Sh 18 O ti l d Fi i l U d t


18/23

18

5. HomeShop18 Operational and Financial Update

Network18s effective holding in HomeShop18 to be at ~65% with theremaining 35% with SAIF Partners (on a convert structure)

Total investment of Rs1bn in HomeShop18

SAIF Partners invested Rs250m initially for a 25% stake Network18 has invested Rs300m in HomeShop18

Incremental Rs450m invested by SAIF Partners in a convertible structure conversion

value of Rs5bn

Business update

Business operations panning TV and Web

Gross monthly revenues of ~Rs130m; Net commission revenues of Rs30m

Currently incurring losses of Rs25m-30m per month Likely breakeven by FY10

No more incremental funding required in the business

6 Other Qs


19/23

19

6. Other Qs

What is the Balance Sheet status of Network18? Debt of Rs2.5bn, cash on books of Rs500m. Net worth of Rs6bn

9.5m pending warrants in IBN18 (@Rs177.6) and 5m pending warrants in TV18

(@Rs398) not likely to be converted substantially out of money

What is Media Venture Capital Fund (MVCF)?

Media Venture Capital Fund is private equity / VC Fund trust

TV18 has invested Rs600m in the fund so far

Focused on investments in digital business, education and new media

MVCF has so far invested in 6 assets including promoter-owned companies

Toppers18 (education channel) and DEN (cable operations). Surprisingly, DEN has

been one of the investments made by MVCF. We were earlier given to

understand that DEN was TOTALLY funded by promoters of Network 18 group

and that NO investments came from the listed entities

6 Other Qs


20/23

20

6. Other Qs

What is TV18 Media and Investments? TV18 Media and Investments is a Mauritius-based 100% subsidiary of TV18 India

Total invested book ~ Rs1.6bn

Funds utilized to buy ~13% stake in Web18 held by Tracer Capital and a couple of

other investors

We believe that it is too steep a price paid valuing Web18 at over Rs10bn

(Tracer has invested USD10m for 10% stake)

Does TV18 intend to convert the 5m warrants of Infomedia?

Conversion price of Rs239 per share - 4x the CMP

TV18 has management control with its 44% stake and 51% stake not mandatory as

per regulations

We believe that TV18 would let the warrants lapse

6 Other Qs


21/23

2

6. Other Qs

How would the 9m treasury stocks to be held in IBN18 treated postthe merger of IBN7?

On merger of IBN7 (Jagran TV), IBN18 will issue 16.3m shares to IBN7 shareholders

IBN18 currently owns a 55% stake in IBN7

Instead of cancelling the shares, IBN18 would keep 9m shares (equivalent to 55%

stake) as treasury stock

Treasury stock could be used later be used to raise funds in IBN18 and deleverage

the balance sheet worth Rs900m at current price

The stock not treated as Person Acting in Concert (PAC), but will cast the vote

along with the management for any resolution for limited time-period


22/23


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Thank you

Nikhil Vora / Bhushan Gajaria / Swati Nangalia(M) +91 98211 32471 / 98219 87091

(Dir) +91-22-6638 3308 / 3367 / 3260

[email protected] / [email protected] / [email protected]

Documents

Network18 Group - Dec08(QA)