Bangalore: Blackstone Group is investing Rs225 crore in the holding company of newspaper publisher Jagran Prakashan Ltd (JPL), the private equity firm’s first investment in a media company in the country. JPL owns the Dainik Jagran, India’s most widely read Hindi newspaper according to the Indian Readership Survey.
Blackstone’s acquisition in Jagran comes a month after the Irish media company Independent News and Media (INM) sold a 7.5% stake in JPL for Rs255 crore. INM, however, still holds 6% in JPL.
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The Gupta family that owns the Dainik Jagran has transferred its entire shareholding in JPL to the holding company Jagran Media Network Pvt. Ltd in which Blackstone has picked up a “significant” minority stake, according to Mahendra Mohan Gupta, chairman and managing director of JPL.
The firm would apply to the Foreign Investment Promotion Board (FIPB) to get the necessary approvals for the investment, he added. “Subject to approval, there will be two Blackstone directors on the JPL board,” said Gupta without divulging the exact size of the stake sold to Blackstone.
The money will be used by the company to support growth plans including acquisitions. While it has no plans to enter the electronic media, the firm plans to venture into regional languages across the country.
“We may look at acquisitions for that,” said Gupta, adding that regional languages are a key preference as a means of increasing readership and overall reach. “We are in talks with several regional print media players for growth through the inorganic route,” he said. “If the talks fail, we will launch our own brands.”
Jagran does not rule out entering the English newspaper market through “the acquisition route”, he added.
According to print media consultant A.S. Raghunath, Jagran needs funds for expansion and to fortify its position in markets such as Bihar, where its immediate rival Dainik Bhaskar from DB Corp. is set to make an entry. Apart from this, “Jagran needs to expand in case it is eventually challenged on its home turf in Uttar Pradesh,” said Raghunath.
Blackstone has been active in India since 2006, has investments of nearly $1 billion (Rs4,440 crore), and has been eyeing the media space for a while. In 2007, the firm proposed to invest $275 million in Hyderabad-based Ushodaya Enterprises Pvt. Ltd, which runs the Eenadu group. The transaction didn’t take place as FIPB clearance was delayed.
Overseas investors are allowed to own up to 26% in newspaper companies or news broadcasters. Five years ago, INM acquired a 26% stake in JPL.
The private equity firm was prompted to acquire a stake as regional language newspapers are poised to grow significantly in the coming years, driven by increasing consumption levels in tier II and III cities as well as rural India, said Akhil Gupta, chairman and managing director, Blackstone Advisors India Pvt. Ltd.
Blackstone wouldn’t invest in a Western media house but regional Indian media is of huge interest, given that it is expected to grow at 15-18% annually for the next few years, Gupta said. The firm continues to evaluate more deals in the segment, including television.
“We have observed that in an economy where ‘have nots’ are transitioning to ‘haves’, regional media is consumed first before getting into English readership,” he said.
According to data from Venture Intelligence, which tracks venture and private equity deals, $289 million was invested in 11 media and entertainment transactions in 2009, a year when investment activity nearly halved.
While English newspapers have a significant share of advertising, there is growing awareness about the market potential of non-metro cities and the regional language papers that cater to those areas, according to a media expert who didn’t want to be named. The realization took hold during the global downturn, when business outside the big Indian cities flourished on the back of domestic demand.
As disposable incomes rise, the penetration levels of magazines and newspapers in regional languages are bound to go up, said Jehil Thakkar, executive director, media and entertainment practice, KPMG India. “From a long-term perspective, for a media company looking at becoming truly national, it’s got to have significant play in the regional market as there is a huge readership available there,” he said.
The print industry is expected to grow 9% year-on-year over the next five years, Thakkar said.
Hindustan Media Ventures Ltd, a subsidiary of Mint’s publisher HT Media Ltd, publishes Hindustan, which competes with the Dainik Jagran in key markets.