network18 group - dec08(qa)
TRANSCRIPT
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8/8/2019 Network18 Group - Dec08(QA)
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Network18 Group
Q & A
Nikhil Vora / Bhushan Gajaria
(M) +91 9821132471 / 9821987091(Dir) +91-22-6638 3308 / 3367
December 2008
Raghav Bahl (Group Chairman)
Haresh Chawla (Group CEO)
Sameer Manchanda (Jt. MD, IBN18)
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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
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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%
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1. Group holding structure
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
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1. Group holding structure
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!
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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
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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
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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
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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
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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
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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
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4.1. IBN18 Operational update
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
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4.1. IBN18 Operational update
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
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4.1. IBN18 Operational update
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
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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
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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
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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
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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
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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
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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
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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
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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