Mumbai: Subrata Roy’s Sahara India is close to buying a majority stake in DigiCable, the cable TV distribution business set up by industry veteran Jagjit Singh Kohli, as the group seeks to reinforce its interests in the television business. According to three people close to the development, Sahara is in talks with DigiCable and a deal is likely soon.
With the acquisition of the stake in Steller Interactive Media Pvt. Ltd, the holding company of Kohli and his partner Yogesh Shah’s cable distribution and Internet businesses, Sahara will mark its entry into India’s Rs 20,000 crore cable television distribution sector, reinforcing its TV interests.
Sahara Group chairman Subrata Roy.
An executive at Sahara said over the phone that the two companies were in negotiations, but refused to elaborate. The executive asked not to be identified.
One of the three persons cited above said Sahara’s purchase has been made possible by the exit of Ashmore Investment Management Ltd from both DigiCable and Broadband Pacenet (India) Pvt. Ltd, Kohli’s Internet business, in which the investment company held a 49% stake each.
Ashmore has invested $240 million (around Rs 1,330 crore today) in the two businesses since 2007.
For now, Stellar has bought back Ashmore’s 49% stake in Broadband Pacenet, and Broadband Pacenet has, in turn, bought Ashmore’s 49% stake in DigiCable with the help of a loan from Sahara.
“The promoters now are 100% owners of DigiCable and its parent company Broadband Pacenet (India). In the second transaction, Sahara will buy a majority stake in Steller Interactive Media,” said the person close to the development cited above.
The existing promoters (Kohli and Shah) will be left with a significant minority stake in Steller after the transaction, this person added. It was not immediately known how much the promoters had paid Ashmore for its stake.
The stake purchase will give Sahara, which already operates a Hindi general entertainment channel Sahara One and a clutch of news channels under the Sahara Samay brand name, control of a running cable TV business that has 8.7 million subscribers, according to the DigiCable website.
For DigiCable, the transaction will provide an infusion of funds to help in upgrading its network to provide digital TV connectivity to households, following the government’s mandate to switch from analog to digital.
The cable operator has a presence in Punjab, Uttar Pradesh, Madhya Pradesh, Rajasthan and Chhattisgarh. DigiCable offers digital feeds of 500 television channels on its platform and is counted among India’s biggest cable operators, which include InCable Net owned by the Hinduja Group, Hathway Cable and Datacom Ltd, DEN Networks Ltd and Wire and Wireless India Ltd from the Zee Group.
Sahara, analysts say, is betting on the potential of DAS (digital addressable system), made mandatory by the government to ensure transparency in the cable distribution business that suffers from under-declaration of subscriber numbers.
Currently, the last-mile beaming of programmes is managed by local cable operators who under-declare subscriber numbers, eroding the profitability of big cable companies and television channels. The introduction of DAS in the country is expected to pump up subscription revenues.
According to a report by Media Partners Asia Ltd, a Hong Kong-based independent provider of information services, total cable industry subscription revenues are estimated to grow from $4.2 billion in 2011 to $6.4 billion by 2020, with broadband contributing 15% of sales by 2020 versus 85% for pay TV.
“Digitization will lead to significant requirements and this will manifest in various transaction opportunities,” said Jagat Dave, director of Ambit Corporate Finance Pvt. Ltd.
The Sahara group has interests in finance, entertainment, real estate and media, among others.
Sahara has filed a defamation case in a Patna court against Mint’s editor and some reporters over the newspaper’s coverage of its dispute with the Securities and Exchange Board of India. Mint is contesting the case.