Network18 Media and Investments Ltd, the group holding company of Raghav Bahl-promoted Network18 group, is in discussions with foreign financial investors for a stake sale to raise Rs300 crore, according to a company official familiar with the development. The official asked not to be named. The company’s listed subsidiary, TV18 India Ltd, recently said it will raise Rs510 crore through a rights issue primarily to retire debt. The company also said that Network18 Media & Investments will subscribe to the unsubscribed part of the rights issue. In a recent interview to CNBC TV18, a channel part-owned by him, TV18 MD Raghav Bahl said the company had a net debt of Rs600 crore and Network18 was raising Rs250-300 crore either through a strategic or financial stake sale (see page 2 in this interview).
As per today’s share price, Network18 has a market cap of Rs827.23 crore, according to Moneycontrol.com. Promoter Raghav Bahl recently infused Rs250 crore into the company, taking the effective market cap of the company to above Rs1,050 crore.
The recent guidelines on calculating effective foreign direct investment (FDI) in downstream investments made by a company (which has FDI), may have opened up space for bringing in more investment to the parent level, as in Network18’s case, in sectors such as media, where foreign investment is restricted. Network18 holds 51.77% in TV18 as on 31 March 2009. Foreign institutional investors already hold 17.99% stake in TV18, according to filings with the Bombay Stock Exchange. Under earlier guidelines, this would have meant that Network18 could only sell a 16% stake to a foreign investor to stay within the permitted FDI cap in TV18 (and this is without taking into account the downstream FDI from Network18, where foreign investment is at 11.74%). Now, however, there is no cap, so long as the majority shareholder in the parent company is an Indian national.
In days to come, we will likely see many Indian media companies taking advantage of this new relaxation to bring in money to fuel expansion, in a market where business sentiment is steadily picking up.
A company spokesperson declined comment.
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