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Home / Companies / News /  Here's the next Tata group company headed for an IPO

Here's the next Tata group company headed for an IPO

Tata Sky set to go public this fiscal year

The proposed IPO’s size may be 2,000-3,000 crore, with a mix of primary capital raising for use in the business and secondary share sales by existing investors

Tata Sky, the satellite television business of the Tata group, will soon file draft share sale documents with the markets regulator for an initial public offering (IPO) by end-March, two people aware of the development said.

Tata Sky, the satellite television business of the Tata group, will soon file draft share sale documents with the markets regulator for an initial public offering (IPO) by end-March, two people aware of the development said.

“Work on the draft IPO prospectus is in advanced stages and could be filed with Sebi (Securities and Exchange Board of India) by next month; so, the deal could possibly be launched before the end of this fiscal," one of the two people said. Kotak Mahindra Capital is advising Tata group on the IPO, the person said, adding a couple of foreign investment banks are also involved.

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“Work on the draft IPO prospectus is in advanced stages and could be filed with Sebi (Securities and Exchange Board of India) by next month; so, the deal could possibly be launched before the end of this fiscal," one of the two people said. Kotak Mahindra Capital is advising Tata group on the IPO, the person said, adding a couple of foreign investment banks are also involved.

The proposed IPO’s size may be 2,000-3,000 crore, with a mix of primary capital raising for use in the business and secondary share sales by existing investors, the second person said.

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The IPO will provide an exit to investors, especially Disney, which has been looking to sell its stake, the people cited above said, requesting anonymity.

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“Disney does not have investments in any other distribution platform apart from Tata Sky. This is non-core for them, and they want to focus on their main consumer-focused business of Disney+, given the fierce competition in the OTT market. Other options were explored in the past to either bring in a strategic investor or Tatas buying Disney’s stake; but right now, it looks like the IPO is the way forward for the company," said the second person.

“There are other investors, too, such as Temasek and Tata Capital, who have been invested in the company for a long time. They, too, would like to dilute some of their stake. Disney, too, will sell part of its stake in the IPO," he added.

Tata Sky started operations in 2004 as an 80:20 joint venture between Tata Sons and Network Digital Distribution Services FZ-LLC, an entity owned by Rupert Murdoch’s 21st Century Fox. Disney acquired Fox in 2019. Disney owns an additional 9.8% stake in Tata Sky through TS Investments Ltd, where Fox owned a 49% stake, with Tata owning the rest. In FY08, Baytree Investments (Mauritius) Pte Ltd (Bay Tree), an affiliate of Temasek, acquired a 10% stake in Tata Sky, while in FY13, Tata Opportunities Fund and Tata Capital Ltd acquired an equity stake in the firm. Tata Sons has a 41.49% stake in the company.

Temasek and Tata Capital declined to comment. Emails sent to Tata Sons and Disney remained unanswered till press time.

Tata Sky is the leader in the DTH market with a 33% share as of December 2020, ahead of Dish TV India, Bharti Telemedia and Sun Direct TV, whose market share stood at 25.45%, 25.17% and 16.35%, respectively, according to a report by the Telecom Regulatory Authority of India (Trai). Tata Sky’s market share went up from 32.3% as of 31 March 2020, data shows.

Despite covid, the total active subscriber base for the DTH industry has grown from 70 million at the end of 2019 to 71 million as of 31 December 2020, Trai data shows.

“(Tata Sky’s) market position has strengthened with the implementation of NTO 1.0 (new tariff order), resulting in a sharp addition of users, and is supported by the largest high-definition subscriber base in the industry," rating agency Crisil said in a note in October 2020.

For FY20, Tata Sky reported a drop in revenue to 4,691 crore from 6,113 crore in the previous year. The company reported a loss of 234 crore in FY20 from a profit of 364 crore in the previous year.

“The industry involves large capex as operators need to undertake significant establishment cost (such as installation services) and operating expenses (such as advertising ) to ensure sustained ramp-up in scale. Tata Sky faces intense competition. Moreover, DTH operators face the risk of technological obsolescence," Crisil said.

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