Anil Dhirubhai Ambani Group’s Reliance MediaWorks (previously Adlabs Films) has inked a non-binding term sheet and entered into negotiation and due diligence process with an International private equity fund to raise Rs 605 crore in exchange for a substantial minority stake in Reliance MediaWorks’s Film and Media Services division.

This follows a rights issue in May last year, which allowed the company to raise an amount up to Rs 500 crore (US $ 111 million) by offering equity shares to the Company’s shareholders.

According to the company statement, Reliance MediaWorks has agreed for a 90 day exclusivity with the potential investor and the proposed investment is subject to the completion of the company’s business restructuring of its film and media services business and necessary approvals along with detailed due-diligence and documentation. Reliance MediaWorks plans to use the proposed investment to pay debt and expand its operations, as indicated by a Reuters report.

Current Offerings: Reliance MediaWorks currently operates a worldwide cinema chain ‘Big Films‘ which has 490 screens across India, USA, Malaysia and Nepal and claims to serve 4 million consumers annually; a television production division ‘Big Synergy‘ which has offices in Mumbai, Delhi and Chennai; digital post production facilities for films, television shows and commercials; Hollywood design-compliant studios in Mumbai; and 1200-member media BPO which offers content processing, image enhancement and restoration services, visual effects and 2D to 3D conversion services with operations at US, UK and Mumbai.

In November 2011, Reliance MediaWorks announced a strategic restructuring of its business which separated the company’s exhibition, film and media service divisions as 100% subsidiaries of the company. The company said that this restructure will enable the company to pursue better growth opportunities in each of these divisions and to help expand its product and service offerings, thereby enhancing the company’s revenues, profitability and business. It had also received the board approval for its restructuring plans in January 2012.

Financials: In May 2012, Reliance MediaWorks posted a net loss of Rs 126 crore for the quarter ending March 30, 2012, a significant reduction from Rs 151 crore loss in the previous quarter and Rs 173 crore in the same quarter last year. The total operational income stood at Rs 176 crore, down from Rs 211 crore in the previous quarter but an increase from Rs 139 crore in the same quarter last year. For the fiscal 2011-12, it reported a net loss of Rs 518 crores, a significant increase from Rs 328.86 crore in the previous fiscal and operating income of Rs 814.5 crore, down from Rs 836.1 crore in the previous fiscal.

Besides this, Reliance MediaWorks had also started offering 3D Conversion services to Bollywood studios and Indian advertisers and had tied up with Vensat in December 2011, to create a Visual Effects, Animation and CG studio in Chennai, thus entering the Southern film market. It had also partnered with Thought Equity Motion, Inc to offer integrated, digital smart content solutions to Indian film studios, broadcasters and sports bodies.