Network18 Media & Investments Ltd (Network18) and TV18 Broadcast Ltd (TV18), belonging to the Network18 Group, have proposed to come out with rights issues to cumulatively raise close to Rs 5,400 crore.
What distinguishes the offers from similar issues, apart from the size, is the ratio of the offers and their pricing which is close to their current market price.
In a communication to the stock exchanges on August 31, Network18 said that the rights issue committee of the board of directors of Network18 Media & Investments Ltd has approved a mega size rights issue of Rs 2,699.62 crore.
The company said the ratio would be 307:50 (307 equity shares for every 50 equity shares held). This roughly works out to six shares for every one share owned (6:1 ratio). The shares would be priced at Rs 30 per share (including Rs 25 towards premium). Shares of Network18 Media closed at Rs 31.50 on the BSE Friday.
TV18 Broadcast Ltd (TV18) said it is planning to raise Rs 2,699.16 crore through the rights offer. The ratio of the offer is 41:11 (41 equity shares are offered for every 11 shares held). This translates into around four shares for every one owned (4:1).
The rights issue is priced at Rs 20 per share (including Rs 18 towards premium of equity shares of Rs 2 each). Shares of TV18 Broadcast closed at Rs 21.50 on the BSE on Friday.
The companies have priced their rights issues (including premium) close to the current market price of the shares. Moreover, post-issue, the equity base of both the companies would swell because of the huge offer size, putting pressure on value appreciation.
Network18 Group, through its subsidiary TV18 Broadcast Ltd (TV18), operates news channels — CNBC- TV18, CNBC Awaaz, CNBC-TV18 Prime HD, CNN-IBN, IBN7 and IBN-Lokmat (a Marathi regional news channel in partnership with the Lokmat group).
The company, through Network 18 Media& Investments Ltd (Network18) operates its digital, publishing and e-commerce assets including moneycontrol.com, ibnlive.com.in.com and firstpost.com as well as e-commerce properties —Homeshop18 and bookmyshow.com and publishes Forbes India, a business magazine, in collaboration with Forbes Media. It is also into other allied businesses.
In a joint press release issued on January 3, 2012, TV18 said it would utilise the rights issue proceeds to repay the existing debt, fund the acquisition of ETV channels and fund the working capital needs. Network 18 will utilise the rights issue funds to repay the existing debt and subscribe to the rights issue of TV18.
Pact with Independent Media Trust
Raghav Bahl, promoter of both the companies, had stated then that the promoter companies have entered into an arrangement with Independent Media Trust, a trust set up for the benefit of Reliance Industries Ltd (RIL), to secure the funding required for this purpose.
However, he would retain the management and 51 per cent control over both the entities.
MoU with Infotel
Network18 and TV18 had, as part of the deal for the acquisition of ETV channels, entered into an MoU with Infotel Broadband Services Ltd (Infotel), a subsidiary of RIL.
Under the MoU, the companies and their associates would have the right to distribute the content of all the media and web properties of Network18 and programming and digital content of all the broadcasting channels including ETV channels through the ‘4th Generation Broadband Network of Infotel’.
Infotel is establishing a pan-India broadband wireless network using the latest technology and the MoU would offer them the first mover advantage.
The statement had mentioned that both the companies would become debt-free and the RIL Trust would fund the promoter entities to subscribe to the rights issue.