Is Videocon Looking To Acquire Loss Making IPTV And VoIP Co IOL Netcom?

Someone told me a couple of weeks ago that Videocon is looking to launch DTH services. In that context, this story, about Videocons plans to acquire IOL Netcom doesn’t come as a surprise: ET reports that two Videocon affiliated companies - Shree Dhoot Trading & Agencies Ltd (SDTAL), an investment company of the Dhoot family that owns Videocon, and Videocon Realty & Infrastructure Ltd (VRIL) have picked up 11.72 percent and 1.97 percent percent equity in IOL Netcom.

Looking at IOLs earnings report annexures, it appears that this is up from SDTALs 6.51 percent stake, and VRILs 1.83 percent stake at the end of Q1-09. IOL Netcom President Siddharth Srivastava has denied that there has been any takeover proposal from Videocon.

IOL Netcom offers content on MTNLs IPTV, and this would fit in with Videocons telecom, DTH and IPTV plans. Here’s a list of their channels. Do note that the company also entered the Voice Over Internet Protocol business (for MTNL) by merging with Exatt Technologies (an allocation of 25 lakh shares, PDF). Exatt was an ISP operating in 10 circles, in collaboration with local cable operators. IOL also tied up to bring GyPSii, a geo-location social networking platform for mobile, web and importantly - set top boxes. The tie-up was via IOLs subsidiary Broadway (site under construction since Feb). GyPSii is a map service and a friend finder.

For the quarter ending June 30th 2008, IOL Netcom reported a net loss of Rs. 9.68 lakhs crores, with revenues of Rs. 3.04 lakhs crores. For the last fiscal, the company had reported a loss of Rs. 21.46 crores, with revenues of Rs. 24.25 crores. Important to note that they paid Rs. 10.08 crores in the year for “Purchase of traded goods”…is that payout for content acquisition?

Note that the Times of India Group (BCCL) also owns a 1.83 percent stake in IOL Netcom, as well as a stake in Videocon, both via the private treaty investment route.

Download: Q1-09 Financials, Annexure

Indiatimes Picks Up 50 Percent Stake In Online Books Marketplace A1Books; A Private Treaties Deal

Well, we’ve been wondering for a while about what Times Internet Ltd (Indiatimes) has been up to. The company now informs us that they’ve made a strategic investment in Webnotions Books India Pvt Ltd, which had launched their marketplace for books in India a couple of years ago, with the site A1Books.co.in. This also explains all the A1books adverts that I have been noticing on the Economic Times website, over the past week. A1Books will provide “over a million book titles” to Indiatimes.com. A couple of things to note:

– Indiatimes has picked up stake in the Indian company, and not Webnotions USA, which was founded by Shinu Gupta in 1995. Webnotions India was established in December 2007, though I do remember meeting Gupta in Delhi at a book fair in September 2006, where he had an A1Books stall.
– A Private Treaties Deal?: Here’s the catch - Indiatimes says they will provide “Brand support” to A1Books, and make books from A1Books available at Indiatimes - effectively giving A1Books access to a large number of potential customers. We have contacted both Gupta and Times Internet for more details, and if no cash has exchanged hands, could this be the first Private Treaties deal from an Internet company (albeit from the BCCL group)?

A1Books provides publishers, distributors, importers and retailers a platform to register and sell their inventory. Like Amazon, A1Books also has an affiliate program.

Update: Well, it’s not a deal with Times Private Treaties, but we’ve learned from sources that it is a Private Treaty deal with Indiatimes. So, the Internet companies are now getting into this business of ads for equity. Interesting times, these. At 50% dilution of equity, I sure hope A1Books has taken a substantial amount of inventory.

If you’re in talks or considering a Private Treaty deal with any of the Media companies - whether The Times of India (BCCL), HT Media, Network18, Dainik Bhaskar Group and others, do read our comprehensive launch interview with the CEO Designate of Times Private Treaties.

“There Are Two Currencies For Advertising - Cash And Treaties; We’re Not Buying To Sell” - S. Sivakumar, CEO Designate, Times Private Treaties

Updated Below

Bennett & Coleman & Co Ltd (BCCL), the largest media group in India, is considered a pioneer of the Private Treaties model, taking equity in ventures in exchange for advertising inventory. The Times Private Treaties Portfolio has between 175-200 companies, some of them listed on the bourses. The apparent success of this model has led other media companies, including HT Media, Network18, NDTV, Dainik Bhaskar and Dainik Jagran to set up their own Private Treaties division.

However, some questions have been raised about whether editorial content is a part of the Treaties deal; Sucheta Dalal had quoted an email from Economic Times editor Rahul Joshi, which mentions editorial “support” to treaties clients. There is also the issue of BCCL bloating valuations of companies, and investing in several companies in the same segment. In a candid interview with Medianama.com, S. Sivakumar, Principal Secretary and CEO Designate of Times Private Treaties, spoke about these issues, and outlined the investment philosophy behind the Private Treaties model.

Read the entire transcript here.

Excerpts from the 34 minute long interview:

On Valuation Of Deals
We don’t have to value the deal, because…there’s a rate card for each of our media vehicles, and he (the entrepreneur) makes a plan - over the next 3-5 years - because brand building is a long term initiative. We have media planners and advertising and branding promotions as value-add - who support by defining target group, SEC, make an assessment and make out a plan. That determines the deal size. A cash client pays in the space of 60 days. In case of a treaty client, I hope to get the payment when the company gets listed. It’s an event that has at least a 3 year time-span. This (Treaties) actually helps an entrepreneur leverage the strength of BCCL without straining his balance sheet from a cash-flow point of view.

On Bloated Valuations
Essentially it is the company that expects the next round to come at a similar view on valuation. The onus is clearly on the entrepreneur.

On Value, Competitive Advantage (And Lack Of)
Q. Let me take the example of Travel space, where you have invested in TravelMasti, TravelChacha, Ezeego1, TravelGuru and HolidayIQ. Where is the competitive advantage established by you since they’re competing with each other?
Very good point. Actually it’s very simple: the whole purpose of advertising is to bring out differentiation. For each of them there is a clear differentiation. For TravelGuru, his whole USP is the strength in the hotel space. Each one has a differentiation. To a layman, everything appears the same. That USP is brought out through the use of a powerful medium as ours.
Q. So you’re giving them space, and how they use the space is their problem?
(more…)

SatNav Raises $7 Million From Sequoia Capital India

SatNav Technologies has raised $7 million in a first round of funding from Sequoia Capital India. The amount of stake diluted has not been disclosed, though Mohit Bhatnagar, Operating Partner with Sequoia says that it’s a significant minority stake, and two members have joined the board. SatNav was incubated at Satyam Computers, under the Satyam Entrepreneur Incubation Program. Here’s a brief on the various players in the consumer GIS space (in no particular order):

ARPU and Projections: SatNav claims that it had revenues of around $1 million last fiscal, and 22000 users. That’s an ARPU of $45.5. They’re now targeting 2 lakh users by the end of this fiscal, and assuming an ARPU of $35, they should have revenues of $7 million by then; at least a 7x increase in revenues. Of course, this calculation depends on whether the numbers they’ve mentioned in the press are correct or not.

Burn Rate: FE reports that the funds should see SatNav through the next 12-18 months. That’s a burn rate of between $389,000 - $583,000 per month, or between Rs. 1.6 - 2.5 crores per month. Where will that money go?

For Products, Targets and BCCLs Private Treaty Legacy click (more…)