The Hindu Business Line : Entertainment Network re-rated

Goldman Sachs and Lehman Brothers have together picked up a 16.56 per cent stake in Times Innovative Media (TIM), the wholly owned subsidiary of Entertainment Network (ENIL), for Rs 200 crore.

The deal values the subsidiary, which operates out-of-home (OOH) advertising business, at Rs 1,208 crore. ENIL’s 83.4 per cent stake in the subsidiary, after the deal, is accordingly valued at over Rs 1,000 crore or Rs 215 per share.

Market potential

The valuation for the OOH business is significantly higher than market expectations. The stock of ENIL, excluding the value of this subsidiary, is now available for Rs 252 per share.

ENIL had earlier announced plans to invest Rs 500 crore in the business over the next three-four years; the recent fund-raising appears to be in-line with its capex plans.

ENIL has been considerably re-rated over the past year, partly on the expectations of higher growth in the OOH business.

ENIL continues to record strong revenue growth on a consolidated basis on openings of new radio stations and increasing advertising revenue.

But, given the intensive competition in the radio business, the market has been ascribing greater value to the OOH business, where the market potential is still unexplored. ENIL’s OOH business has scaled up revenues quickly in a short time, on the back of new contracts and long-term extensions of existing contracts (such as the 10-year contract for the Delhi-Noida-Delhi flyway).

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