RIL buys 25% stake in Balaji Telefilms for Rs413 crore
Reliance Industries Ltd (RIL), India’s biggest company by market value, on Thursday acquired a 24.92% stake in film and television production house Balaji Telefilms Ltd in a deal worth Rs413.28 crore.
The board of Balaji Telefilms approved the investment by RIL, which will buy 25.2 million equity shares at Rs164 each, subject to shareholder and other approvals.
The stake purchase will give RIL access to content generated by Balaji Telefilms for use by its telecom arm, Reliance Jio Infocomm Ltd.
“This investment in content production (including digital content) is in line with RIL’s commitment to invest and grow in telecom, digital and media businesses,” RIL said in a statement.
Balaji Telefilms is a content producer operating across television, films and digital platforms. In April, it launched an ad-free, subscription-based online streaming service, ALTBalaji, with 32 original shows in Hindi, Bengali, Tamil and Gujarati.
“The investment by RIL would be utilized to further speed up content development initiatives, especially for ALT, thereby providing it with a strong ability to compete with other OTT (over-the-top) service providers—both global and Indian,” Balaji Telefilms said in a statement. “Reliance Industries Limited has made a significant contribution towards creating a digital revolution in India by providing high-speed data on handheld devices at extremely competitive price, thereby helping to create an environment ripe for ALT’s success. This investment will give strong impetus to the company’s focus on becoming India’s content powerhouse.”
ALTBalaji has garnered over 4 million downloads across 80 countries, the company said.
This transaction is significant for the Indian OTT industry and is expected to further accelerate the growing trend of media consumption on the go. The number of video-capable devices and connections are expected to grow 2.2 times between 2016 and 2021, reaching 800 million, according to the Ficci-KPMG Media and Entertainment Industry Report 2017. India has about 30 OTT companies.
In 2016, digital advertising contributed Rs7,692 crore and is expected to expand at a compound annual growth rate of 30.8% until 2021 on the back of increased spending on OTT platforms and increase in consumption of video online through mobile phones, the report said.
Axis Capital Ltd acted as the sole investment banker for the RIL-Balaji transaction.
The deal will give ALTBalaji a greater chance of success in the OTT space, said Abneesh Roy, senior vice-president at Edelweiss Securities Pvt. Ltd. “It’s a win-win for both RIL and Balaji. Balalji will get access to a lot of funds, the funding infusion will help them create better content and increase budgets for both marketing and advertising. In addition they can access the subscriber base of Jio. Reliance, which manufactures the LYf phone, could perhaps pre-install the ALTBalaji app on those phones,” explained Roy.
Apart from telecom, RIL, controlled by billionaire Mukesh Ambani, has businesses in refining, petrochemicals, textiles, natural resources and retail.
The company ventured into the television and content business in 2014 when it acquired Network18 Media and Investments Ltd, founded by media entrepreneur Raghav Bahl.
Network 18, through its subsidiary TV18 Broadcast Ltd, operates general entertainment and news channels such as CNBC18 and CNBC Awaaz. TV18 also operates a joint venture with Viacom, called Viacom18, which houses a portfolio of popular entertainment channels, such as Colors, across genres.
“This makes Balaji well funded for the next three years to execute its plan on digital video side and Jio’s scale and distribution might would also help tremendously,” a media analyst at a large domestic financial services firm said on condition of anonymity. “AltBalaji could be offered bundled with Jio’s premium plans and lot of other cross-selling opportunities will arise.”