RIL Network18
(by Vikas SN and Nikhil Pahwa)

Reliance Industries, today, announced plans to acquire the Network18 and TV18, initiate open offers for acquisition of shares. This follows resignations from Network18’s group CEO, COO and CFO since yesterday. The process of acquisition of Network18 began in January 2012. An overview of significant events in Network18 over the last year or so, leading up to the RIL acquisition:

(Note: we’ll keep updating this post as fresh developments emerge).

January & March 2012

In short: Independent Media Trust (IMT), a trust set up by Reliance Industries, agreed to fund the Promoters of Network18 and TV18, which allowed them to subscribe to a part of a proposed Rs 5400 crore Rights Issue announced by Network18 and TV18. Funds from this issue would partly be used to pay debt (Rs 2050 crore), and partly to buy stake held by RIL in the ETV group channels.

The details: The IMT subscribed to Zero Coupon Optionally Convertible Debentures (ZOCD) in RB Mediasoft Pvt Ltd, RRB Mediasoft Pvt Ltd, RB Media Holdings Pvt Ltd, Aventure Marketing Pvt Ltd, Watermark Infratech Pvt Ltd, Colorful Media Pvt Ltd, all owned and controlled by Raghav Bahl. Before the subscription, Raghav Bahl and his affiliates controlled 40% in Network18. IMT had an option to convert the debentures into equity shares before 10 years. As a part of the terms of subscribing to the debentures, RIL subsidiary Infotel Broadband got preferential access to Network18′s content from all its media and web properties and TV18′s programming and digital content of all its broadcasting channels.

Upon conversion, IMT would own 99.9% in the above-mentioned target companies. The target companies would subscribe to a Rs 2700 crore rights issue by Network18, which would use Rs 1300 crore to pay off debt, and Rs 1400 crore to subscribe to a Rs 2700 crore rights issue from TV18, in which it already held 51.24%.

TV18 would use Rs 750 crore to pay off debts, and pay Rs 1950 crore to buy 100% in Equator Trader Enterprise Pvt Ltd. Equator owned:

– Almost all the equity shares of Panorama Television Pvt Ltd, which owned ETV Rajasthan, ETV Madhya Pradesh, ETV Bihar, ETV Uttar Pradesh, ETV Urdu.
– 50% stake in Prism TV Pvt Ltd, which owned ETV Marathi, ETV Gujarati, ETV Kannada, and ETV Oriya.
– 24.5% in Eenadu TV Pvt Ltd, which owned ETV Telugu and ETV 2. Of the remaining stake, 51% was held by Ramoji Rao, and 24.5% through Anu Trading Pvt Ltd, an RIL group company.

As per an offer letter issued in March 2012, for TV18’s rights issue, TV18 had an option agreement with Anu Trading and Devaki Commercials Pvt Ltd: upon exercising of these options, TV18 would own 100% in Anu Trading, resulting in an ownership of Prism and 49% in Eenadu.

May 2012

In short: the Competition Commission of India concludes that RIL has indirectly acquired control of Network18 and TV18, but that it does not have an adverse impact on competition.

The details: The CCI said that “Acquisition of such a right to convert the ZOCD’s (debentures) into equity shares, at any time before the expiry of ten years from the date of subscription, confers on IMT the ability to exercise decisive influence over the management and affairs of each of the target companies and the same amounts to control over the target companies for the purpose of the Act. Since control over the target companies is being acquired by IMT, the subscription to the to the ZOCDs in-turn would also result in the indirect acquisition of control over Network18 and TV18 as these companies would be in control over the target companies.”

“In terms of the trust deed establishing the IMT, RIL is the exclusive beneficiary of the IMT. Further , Reliance Industrial Investments and Holdings Ltd, a wholly owned subsidiary of RIL is designated  the protector in the trust deed. The protector is authorised to remove trustees at any time and upon such removal, it is lawful for the protector to appoint other person(s) as trustees. Considering these facts, it is evident that the control of IMT rests with RIL. ” The CCI concluded that RIL has acquired the target companies and indirect control over Network18, TV18 and Equator, but also said that the deal does not have an adverse impact on competition, since an ISP has open access, and Network18 group properties are available on the Internet, which can be accessed by consumers from ISPs other than Infotel as well.

July 2012

The Enforcement Directorate has begun probing the Rs 2,604-crore deal between Ramoji Rao and oil major Reliance Industries, the Asian Age reported. Congress MP Vundavilli Aruna Kumar had submitted a representation to the Finance Ministry, alleging money laundering, and questioning how shares were bought at Rs 5,28,630 each when Mr Ramoji Rao’s companies were incurring losses.

September 2012

Network18 and TV18 filed for a rights issue with the BSE to fund the ETV acquisition. Network18 had filed for a rights issue of Rs 2,699.62 crore, offering 89.98 crore shares (89,98,73,930 shares) while TV18 Broadcast had filed for a rights issue of Rs 2,699.16 crore, offering 134.95 crore shares (134,95,77,882 shares).

May 2013 to February 2014

A year of churn begins. Network18 launched an integrated business newsroom, comprising its broadcast and digital news outlets in the business media space such as CNBC-TV18, CNBC Awaaz, CNBC-TV18 Prime HD and Moneycontrol.com. There was cost-cutting across the group, as TV18 had laid off 30% of its employees. Layoffs also took place at Web18 with sources saying that In.com was impacted the most, followed by MoneyControl.com and the tech portal Tech2. Prior to this, the Forbes India founding editorial team was moved out of the group. Dilip Venkatraman, CEO of CNN-IBN and IBN7, leaves the company, after an eight year stint, followed by IBNLive CEO Rajan Srinivasan. Forbes India CEO Gurmit Singh joins Yahoo India. Newer business heads are taking over: Avinash Kaul took over as CEO of IBN Network, and Durga Raghunath has taken over as Web18 CEO from Lakshmi Narasimhan, who has been moved to a group role.

January 2014

TV18 completed the purchase of ETV Channels for Rs 2,053 crore. Following this, the company owned 100% stake in ETV News channels for Uttar Pradesh, Madhya Pradesh, Rajasthan, Bihar, Urdu, Bangla, Kannada & Haryana; 50% stake in ETV Marathi, ETV Kannada, ETV Bangla, ETV Gujarati & ETV Oriya and 24.5% stake in ETV Telugu and ETV Telugu News.

March to May 2014

Reliance Industries hires former Zee News CEO Alok Agrawal, former Janmat TV Channel Head Umesh Upadhayay, former Hindustan Times Executive Editor Gautam Chikermane, former Sahara News group editor BV Rao, former India TV Managing Editor Rohit Bansal and former Times Internet Ltd Deputy News Editor Shivendra Singh Chauhan.

27th May 2014

TV18 revenues declined 5.9% year-on-year to Rs 556.4 crore for the financial year ended March 31, 2014, but reported an operating profit of Rs 116.9 crore, up from Rs 77.9 crore in the previous fiscal. The operating margins for the segment also improved to 21% from 13% last fiscal.

Network18 reports revenues of Rs 2692.38 crore for FY13, up from Rs 2515.98 crore. Losses reduce to Rs 36.77 crore from Rs 105.45 crore the previous financial year.

28th and 29th May 2014

Network18 CEO B Saikumar quits. This is quickly followed by resignations from Network18 COO Ajay Chacko and CFO RDS Bawa. Former Times Television Network CEO Avinash Kaul joins Network18 as CEO of IBN Network.

Reliance Industries announces plans to deploy Rs 4000 crore to, through IMT, acquire 78% in Network18 and 9% stake in TV18 (rest being acquired through Network18), and then acquire shares via Open Offers.

The open offer amounts to Rs 2295 crores, of which Rs 943.7 crore is being paid for 21.96% stake in Network18, Rs 1347 crore for 26% in TV18, and Rs 3.92 crore for 26% in Infomedia18 Press. The offer prices for each company is significantly lower than prevailing market rates, which is unusual. Details of the open offer here.