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The spotlight
is now on media companies as far as investor interest goes. Or at
least that is what the number of media mandates bagged by investment
banks in recent months seems to suggest. Consulting major Ernst
& Young is currently handling fund raising mandates for Metalight
Productions and RITV and is conducting a valuation exercise for
CMM. Small investment banking boutiques like Waygate Capital, which
is run by former eVentures team member, Rajesh Jog, began their
spadework to cater to this sector months ago and are now seeing
mandates from media clients. “We are handling several clients
in the media and entertainment sector right now who are either looking
to raise money, scale up the business or corporatise. We have been
studying the sector for several months and have now begun to take
up work in this sector,” says Jog.
Adds investment
bank Avendus Advisors co-founder Ranu Vohra, “We have picked
up a couple of large media mandates recently and as far as the investors
are concerned, valuations for these companies are really attractive
at this point.” What has triggered this spate of activity in
the media sector? Says Ambit Corporate Finance’s head of media
and entertainment Ashutosh Ghanekar, “It’s not that the
interest has gone from zero to a high level of interest, the interest
in media was always there. It’s just that the overall sentiment
is now improving and people across sectors expect things to look
up this quarter. Promoters who want to access capital are actually
coming out with the requirement since they now have an option given
that a range of investors both strategic and financial are now showing
an interest in media companies.”
Industry observers,
however, caution that the media sector is not entirely ready to
absorb capital given the fact that it still harbours a degree of
organisational and financial indiscipline, moreover scaling up the
business is crucial for investor returns, which again seems difficult
for most media companies given their current management structure.
Says Vohra, “Most media companies in India today are one-man
shows which from the private equity perspective is a risk, another
issue is one of growth. Given that the ad pie is shrinking, media
companies will have to cannibalize others’ shares in order
to grow in the domestic market.” Investors like IndAsia’s
Darius Pandole are, however, bullish on the sector given the opportunity
to create critical mass through M & A activities and the growing
international demand for Indian content. “There will be increased
M & A activity since this is a fragmented industry which is
ripe for consolidation and since valuations are currently low, this
is a good time to build critical mass, secondly the sector is beginning
to see growing international demand,” he explains. Investment
opportunities in this sector range from channels to production houses,
radio ventures, multiplexes, film production companies, music distribution
and event management companies.
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