Global Broadcast News Ltd (GBN), the company that looks after the mainstream broadcast and film interests of media conglomerate Network18 is looking to raise around Rs800 crore to fund its aggressive expansion plans that include launching regional channels. The company has already got an approval from the Foreign Investment Promotion Board (FIPB) to raise Rs500 crore by selling a maximum of 11% of its equity to a foreign investor.
“We will raise fresh capital to fund our new ventures,” said Raghav Bahl, managing director, Network18 Media and Investments Ltd, the holding company for all of the group’s ventures including Television18 Ltd, the company that houses all business news related ventures such as the TV channels, CNBC-TV18 and CNBC-Awaaz, and the proposed Hindi business newspaper to be launched in partnership with leading vernacular publisher Jagran Prakashan Ltd (JPL); Web18, which houses all the Internet businesses; Homeshop18, the online retail business; and GBN.
Although it has the approval from FIPB, the government agency that sanctions foreign investments in Indian companies, for a stake sale, Bahl said he was not keen on a strategic partner. Instead, he added, GBN might issue foreigncurrency convertible bonds (FCCBs) to raise the capital: “There is no plan to get a strategic partner on board.”
Among the new businesses GBN is exploring is a diversification into regional markets. “We have consolidated our position in the mainstream news broadcast space. Then, we will have a significant presence in the general entertainment space through Viacom18. So, the next logical step for us is to go deeper into the regional markets,” Bahl said.
One such channel in Marathi will go on air in the next two-three months. GBN plans to have in place a bouquet of at least 10-12? more regional channels across India.
The Marathi channel is being launched in partnership with Maharashtra-based publisher Lokmat Group. The firm will follow the same strategy to enter other regional markets. “Going greenfield puts a lot of pressure on resources. Partnerships make more sense,” Bahl added.
GBN currently runs two news channels, CNN-IBN in English and IBN-7 in Hindi. IBN-7 was originally promoted by JPL.
The regional language broadcast market is heavily segmented and is largelydominated by local players such as Sun TV in Tamil Nadu. Zee Network, and the Andhra Pradesh-based Eenadu group are the only two nationalplayers with a presence across states such as Punjab,Rajasthan, West Bengal and Gujarat.
According to industry estimates, non-Hindi and non- English channels account for around one-third of total TV viewership in the country.
“The regional markets are hugely underserved. With both subscriptions and advertising looking up, it makes eminent sense to go regional,” said Bahl. Analysts agree that regional advertising will bloom in the near future. “The regional news space involves a low incremental cost but the upside from revenue point of view is quite high,” said a media analyst at a brokerage in Mumbai who did not wish to be identified.
According to estimates by media buyers, regional TV channels earned Rs4,500-5,000 crore in advertising revenues in 2007 against the total TV ad spend of around Rs20,000-22,000 crore.
A large chunk of funds that GBN is raising is, however, likely to go into Viacom18, a 50:50 joint venture (JV) between Network18 and global media conglomerate Viacom International Inc.
“The launch of the general entertainment channel under Viacom18 will require around Rs300-400 crore in investment,” said Bahl. The two partners had committed $90 million (Rs354.6 crore) each to the JV. According to Bahl, Network18 is funding the JV through GBN and the latter has already contributed $50 million to it. The rest, as well as new funds for day-to-day operations will be made available through the fresh capital that will be raised by GBN.
Viacom18 currently has three channels—MTV, VH1 and Nickelodeon—under its fold and its proposed mass entertainment channel is likely to go on air in the next three months. GBN will also fund the financial requirements of Network18’s film business operating under Studio18.
GBN reported a loss of Rs32 crore on revenues of Rs77 crore in 2006-07. In the quarter ended September, it registered a loss of Rs6 crore on revenues of Rs25 crore. Analysts, however, expect the firm to more than double its revenues in 2007-08. “Both CNN-IBN and IBN-7 have emerged as the top channels in their space. We expect GBN to clock in around Rs150-200 crore in revenues in the current year,” said the analyst at the Mumbai brokerage.