Mumbai: Investment bank Ozone Capital Advisors Pvt. Ltd is set to launch a media inventory-based fund that will pool advertising space from India’s media firms to then buy equity stakes in small, growing companies by offering such space as deal currency.
If successful, the fund is set to institutionalize a practice that is starting to take root across media houses in so-called private treaties where newspapers, magazines and television companies offer advertising space, often at very favourable rates, to companies looking for publicity, but not able to necessarily pay in cash.
Pioneered by Bennett, Coleman and Co. Ltd (BCCL), India’s largest print media firm and publisher of The Times of India and The Economic Times, the practice, in different forms, has been embraced by several other media houses in recent times, including HT Media Ltd, the publisher of Mint.
The marketing tactic, which aims to turn companies that cannot afford to pay for the advertising into customers, has, however been marred by increasing questions and growing concerns about how such treaty clients are treated in news stories and the lack of disclosure to readers about the financial links between such “clients” and media houses.
Ozone’s fund, dubbed Morpheus Media Fund after the Greek god of dreams, expects to raise about $300 million (Rs1,293 crore) worth of advertising space from about 15 media houses in India across print, broadcast, radio and outdoor advertising, in its first round, said Ozone officials.
Participating media firms will then become limited partners of the fund, owning its units. This fund will cherry-pick equity in about 30 Indian firms, all of which are in the “growth curve”, said Deepesh Garg, a director of Ozone.
The fund aims to help media firms participate in the equity growth story of fundamentally- strong companies and, since it will be managed by a third party, such deals won’t dent the credibility of the media houses, claims Balu Nayar, a director at Ozone, who will also be the fund manager of Morpheus. “Ultimately, nobody wants bad reputation.”
Neither Nayar nor Garg is willing to name the media houses that are in talks with Ozone for the fund.
“We are awaiting clearance from the capital market regulator. At this point, we cannot name any media house, but many large players in print and broadcast are talking to us and we are in the process of finalizing the partners,” claimed Nayar. He said one very large media house will have the largest amount of ad space being offered and Ozone will tailor the offer to match the clients’ needs.
Mint was unable to independently verify these claims. Attempts to elicit comments from most media companies were unsuccessful.
It is unclear if BCCL, which is the largest Indian media company offering such private treaty deals, having struck deals worth thousands of crores with some 150 firms, will be willing to join the pool. Officials from BCCL, the Dainik Bhaskar group and outdoor media firm Lakshya Media Pvt. Ltd, contacted by phone and email about Ozone did not offer any comment ahead of the publication of this story.
Haresh Chawla, the Group CEO of Network18, said his group currently has no relationship with the proposed fund. Vivek Khanna, who heads HT Media’s private treaty business, said he has been contacted by the fund managers and would meet them soon.
The Morpheus fund will buy 2-20% stake in companies for media space worth $2-20 million. “Many Indian companies view advertising as business expenditure than investment, but this mindset will now change,” Nayar said.
Some brand consultants and media analysts say the fund might be on to something in terms of trying to deflect criticism of media companies doing such deals though it is unclear how they plan to avoid clients seeking favourable news coverage as well.
“Professional value creators add a lot of credibility into a system,” says Ramesh Thomas, president and chief knowledge officer of brand consultancy Equitor Management Consulting.
Annual advertising budgets add up to 0.34% of India’s about $1 trillion gross domestic product, while the world average is close to 1%.
Ozone’s Nayar was earlier heading marketing firm International Management Group (IMG) India.
DCD Group, a specialized Dubai-based family office business with operations is New York and London, has strategic equity in Ozone, which was originally found by four investment bankers.
Ozone runs a securities broking business and a multi- family office business. Ethos Capital Advisors, as Ozone’s family-office business is named, was launched in partnership with Nadathur S. Raghavan, co-founder and former managing director of Infosys Technologies Ltd, with an anchor investment of $250 million. Family offices are private wealth management advisory firms that serve ultra-high net- worth individuals or families.
Editor’s Note: Mint’s Journalistic Code of Conduct, which governs our own news department’s policies on identifying potential conflicts of interests, is available at the top of our website www.livemint.com under Mint Code.