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Buffalo Networks spins off Tehelka; in talks with VCs

Ashok Jainani

MUMBAI, May 2

TEHELKA.COM, the Web site that created a sort of tehelka literally with exposes on corruption in defence deals recently and on match-fixing in cricket earlier, has been spun off into a separate company by its parent, Buffalo Networks Pvt Ltd.

Tehelka.com Pvt Ltd, a fully-owned subsidiary of Buffalo Networks, was incorporated in Delhi in late April and is scouting for investors.

The Buffalo Networks Managing Director, Mr Tarun Tejpal, confirmed to Business Line that the company was talking to potential investors and the size of the current private placement was about Rs 10 crore. It was decided to spin off Tehelka.com into a sep arate company to give it an identity independent of Buffalo's other businesses.

Tehelka.com was seeking ``serious'' investors and planned to privately place its equity for a sum of between Rs 10 crore and Rs 11 crore initially, though the size of the private placement was estimated at about Rs 40 crore, investment banking sources sa id.

Sources said that Tehelka could raise the targeted amount in one or more tranches. Tehelka is looking for long-term investors as the company is unlikely to earn profits at least in the first two years.

It is possible that Tehelka could be looking at mainly non-resident Indian (NRI) investors to be free from any pressures. At this stage, the company has no plans to list its shares.

Mr Tejpal said that Tehelka.com, which had created a strong worldwide brand within nine months, was expected to earn profits in the second or third year of its operations. Tehelka creates original content which will be distributed across Net, television, radio and print. Tehelka will distribute the content through alliances with channel owners except in the case of the Net where the channel is owned by the company.

Tehelka.com during the first nine months of its operations had spent about $1 million and earned revenue of a quarter million dollars. Its revenue sources are advertising, syndication, subscription and franchising.

The blueprint prepared for prospective investors outlines a five-year road map which will seek to extend the Tehelka brand to television and radio in the first year, into print products in the second year and switch to a subscription model and earn an op erating profit (about Rs 1.3 crore) in the third year. It aims to wipe off accumulated losses (about Rs 13 crore) of the first three years and earn net profits in the fourth/fifth year.