Indian billionaire Subhash Chandra’s Essel Group is seeking to raise as much as $500 million to fund expansion and pay debt at some of its companies, said two people with knowledge of the matter.
The group may use the funds for satellite television service Dish TV India Ltd. (DITV), cable operator Siti Cable Network Ltd. (WNW) and schools operator Zee Learn Ltd. (ZLL), one person said, asking not to be identified as the information is private.
Essel joins Indian media companies including Network 18 Group and Living Media India Pvt. in seeking capital. Essel has approached private equity firms, the person said. Dish TV, India’s biggest provider of direct-to-home services, and Siti Cable are expanding as the nation makes digital television services mandatory. Advertisement and subscription revenue is forecast by G2Mi Research to increase 87 percent by 2015.
“There is a heightened interest among investors in two media segments, broadcaster and cable companies, owing to a structural change that’s anticipated in the country through digitization,” said Vivekanand Subbaraman, an analyst at MF Global Sify Securities India Pvt. in Mumbai.
Essel isn’t in “active dialog” with buyout firms, said Himanshu Mody, group head for finance and strategy, in an interview. “We from time to time keep raising expansion capital for various entities within the group.”
Dish TV fell 1.2 percent to 71.50 rupees in Mumbai today. Siti Cable, formerly known as Wire & Wireless India Ltd., dropped as much as 2.8 percent and closed at 19.55 rupees, a decline of 2.3 percent. Zee Learn rose 3.3 percent, while India’s benchmark BSE India Sensitive Index (SENSEX) rose 0.5 percent.
The money raised wouldn’t be used for Zee Entertainment Enterprises Ltd. (Z), Essel’s largest publicly traded unit, the people said. With a market capitalization of 164.3 billion rupees ($3 billion), Zee Entertainment had 3.3 billion rupees in cash at the end of March, data compiled by Bloomberg show.
Chandra, 61, a former rice trader, partnered with News Corp.’s Rupert Murdoch soon after he started Hindi entertainment channel Zee TV in 1992, to produce and distribute content. The partnership ended in 2000.
Apart from its television business, Essel manages firms that build roads, runs a newspaper and makes packaging for toothpaste and food companies.
Dish TV had total debt of 12.1 billion rupees as of March 31 and Siti Cable, which sells cable services to about 10 million households in India, had 3.5 billion rupees of debt at the time, data compiled by Bloomberg show.
Siti Cable plans to raise 3.2 billion rupees selling warrants convertible into equity to its owners including Essel, according to a filing to exchanges on Sept. 6.
TV18 Broadcast Ltd. (TV18) and Network 18 Media & Investments Ltd. (NETM) said in January they would raise as much as 27 billion rupees each from Reliance Industries Ltd. (RIL) to fund the acquisition of 12 regional television channels and to reduce debt.
In May, the Aditya Birla Group said it would buy a 27.5 percent stake in Living Media, which runs the India Today magazine and television channels including Aaj Tak.
Subscribers in India’s four largest cities of New Delhi, Mumbai, Kolkata and Chennai will only get digital broadcast services from Nov. 1, with the rest of the world’s second-most populated nation switching over to the service in phases by 2014.
“Dish TV shall be one of the key beneficiaries of mandatory digitization,” Ashish Upganlawar, an analyst at Spark Capital Advisors, said in a note to clients on Sept. 4. The company has about 4 billion rupees of cash, which will increase as it adds subscribers, according to Upganlawar.
India’s television industry is the third largest in the world, with an estimated 148 million TV households, according to G2Mi Research.
Advertising and subscription revenue is forecast to rise to 618 billion rupees by 2015 from 330 billion rupees in 2011, while TV households may increase 18 percent to 175 million in the period, according to the U.K.-based research firm.
The mandatory digitization “is truly a landmark opportunity for all digital television distribution platforms,” Chandra, chairman of Dish TV, said in the company’s latest annual report.
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