Mumbai: Ad for equity is a barter deal in which media houses buy stakes in companies and then promote the firms through advertising and other publicity deals.
Lessons learnt: Capital18 Media Advisors’ Sarbvir Singh.
The concept, also known as private treaties, was pioneered in India a few years ago by Bennett, Coleman and Co. Ltd, publisher of
The Times of India and
The Economic Times.
Other media houses, including HT Media Ltd, publisher of Mint and the Hindustan Times, Network18 Group, which runs news channels CNBC-TV18 and CNBC Awaaz, DB Corp. Ltd, publisher of the Dainik Bhaskar and the Daily News and Analysis, and New Delhi Television Ltd, broadcaster of NDTV 24X7 and NDTV Profit channels, adopted the model.
Ethical questions linger over whether such ad-for-equity transactions influence news reportage and disturb the line separating editorial and advertising departments in media companies. But the business model itself is now under a cloud. With equity valuations declining sharply since February 2008, it’s difficult for media houses to exit the investments they made when valuations were at their peak.
Sarbvir Singh, managing director of Capital18 Media Advisors Pvt. Ltd, the specialist venture and private equity arm of Network18 Group, plays an advisory role in ad-for-equity transactions of the group, though he clarifies that he spends “95% of his time on cash transactions”, or the group’s pure play venture capital/private equity business.
In an interview, Singh talks about lessons learnt from the ad-for-equity concept and the Chinese wall between Network18’s editorial and marketing divisions.
So far, his venture capital business has been fully funded by Network18, but now he wants to raise a fund from external sources. Edited excerpts:
Can you tell us the scale of the group’s ad-for-equity investments?
We have not done as many deals as some of the other groups, but I can neither disclose the names of our investee companies nor the amount invested, as the group is yet to make them public. So far, we have (invested in) four listed and three unlisted companies.
With the valuations going down, have media houses started questioning the concept of ad for equity?
Obviously, our (investment in) listed companies have taken a bath. They’re down to as much as 10-33% of the original investment. We’ve had our share of blow-ups, but we’ve been careful. What we’ve learnt from ad for equity over the last two years is that you’ve to use your brain. You can’t do it in a way where you invest in anything and everything. I would say that we have made our mistakes, and we’re more cognizant of that.