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Buyers clearly want to back market leaders: Jagat Dave

Reghu Balakrishnan/ 20 Aug 12 | 01:22 AM

The media and entertainment industry is back onto the deal table and even corporate leaders such as Ambanis and Birlas have shown interest in the Indian media through recent acquisitions. Jagat Dave, director, Ambit Corporate Finance — the investment banker behind recent deals such as Aditya Birla-Living Media and Viacom-Network18 — speaks to Reghu Balakrishnan about the investment scenario in India. Edited excerpts:

Since 2011, we have seen a spurt of mergers and acquisitions (M&A) deals in the media space, especially by some corporate giants.
The Indian media industry faces a situation of relatively small and scattered players and when you have a landscape like this, you are bound to have consolidation. This process gains momentum during an economic slowdown. Clearly, the Indian media industry in the last two-three years has not had the best of times. Also, there have been newer distribution and media consumption platforms, which have emerged in the last five years. All of this continually requires new investment, new teams, and setting up of new ventures – necessitating raising capital. In an FDI-controlled sector like media, raising capital from overseas investors is limited and therefore one sees large Indian corporate groups extending themselves to the Indian media sector.

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And from the buyer’s point of view?
Buyers clearly want to back market leaders, be it players with unique content or those enjoying a reputation for independence and credibility. Transacting with such players brings the twin advantage of leveraging an existing market leadership, which helps to expand the brand and monetise it across emerging distribution platforms, especially among mobile and digital, and eventually leading the consolidation in their respective segments.

The media space has rarely seen major private equity (PE) deals
The Indian media industry has had its fair share of PE participation, but it needs to ask itself the question: Have we generated expected returns for PE investments? The answer to that is, it has been a mixed bag. However, seeing the continued increase in the individual media consumption, coupled with an evolving but encouraging regulatory environment and consolidation, the Indian media sector currently is looking very promising to most PE funds.

What will be the future of print media in India?
Print in India continues to have a bright future, especially in regional markets. For most leading consumer brands, a higher proportion of incremental sales comes from regional markets. This necessitates a focused offering in local language, local customs, local advertising and regional print still continues to be the best price-value equation for leading advertisers. Therefore, you will notice the top three-four regional newspaper groups in the country are launching editions every quarter to expand their markets to cater to this trend in ad-expenditure. Foreign strategic interest in print is low, only because of the 26 per cent FDI cap.

Has the Indian Premier League (IPL) lost its charm? A few IPL teams remain on the block without buyers
It is a great brand launch platform, delivering exceptional value to advertisers and it continues to be so. One can recall at least four brands which were launched on the back of IPL and today they have become hugely successful national brands within a three years. Some IPL franchisees are strategic to their owners, while some are currently in dialogue with the BCCI (Board Of Control For Cricket In India) regarding some clarifications, so there is very limited supply. There is interest in IPL franchisees but at the right price.

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