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Tata Sky in talks with private equity firms to raise up to Rs 1,800 crore post shelvi
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Breaking News :  Tata Sky in talks with private equity firms to raise up to Rs 1,800 crore post shelvi
Tata Sky in talks with private
equity firms to raise up to Rs
1,800 crore post shelving plans
for IPO
MUMBAI: Tata Group's joint
venture DTH company Tata Sky
has initiated talks with bulge
bracket private equity firms to
raise up toRs 1,800 crore ($300
million) after shelving its plans
for an initial public offering
( IPO). The loss-making venture
will use the capital for its
technology upgradation and
expansion, said four people with
direct knowledge of the process.
In 2013, Tata Sky had planned to
list the venture and raise Rs
2,000 crore by selling 25% stake.
It had even shortlisted
investment banks Citigroup
Capital Markets, Morgan Stanley
India Equities and Kotak Mahindra
Capital Co to manage the issue.
Citi and Morgan Stanley have been
retained but now the mandate is
to raise PE funding, a person, who
is a part of the process, said. The
company has been bleeding under
high debt and slower sales pick-
up, and has revised its valuation
expectations after the bankers
didn't get initial demand from
global institutional investors.
"The company will now tap private
equity players who can offer
patient capital and can wait till
the company turns
profitable,"another person said.
"Most of the global investors such
as Bain, Blackstone, Warburg
Pincus, TPG and General Atlantic
have been approached."
ET could not independently verify
these names. Confirming that the
company has shelved its listing
plans, Harit Nagpal, chief
executive officer of Tata Sky in
an SMS response said: "All our
cash requirements have been and
will continue to be met by existing
Data from Capitaline shows that
in 2013-14, at a standalone
basis, the company made a loss of
Rs 280.4 crore on net sales of Rs
3,023.2 crore compared with a
net loss of Rs 378.9 crore on
sales of Rs 2,286 crore recorded
in the previous fiscal. Finacials
for FY15 were not available.
In comparison, Dish TV, Asia's
largest direct-to-home service
operator, has a market
capitalisation ofRs 10,319.56
crore. In FY14-15, it clocked Rs
2,781.64 crore of revenues and a
Rs 796-crore EBITDA and aRs
1.01-crore net profit on a
consolidated basis.
Tata Group holds 60% stake in
Tata Sky along with Rupert
Murdoch's 21st Century Fox
owning around 30% stake. PE firm
Temasek, through its arm Bay
Tree Investments and Tata
Opportunities Fund (TOF) holds
the residual stake in the
TOF was the last to come on board
at an estimated valuation of Rs
5,000 crore, which was almost
three times the value at which
Singapore's sovereign wealth fund
Temasek invested to pick up a
stake in 2007. Over 10 years, DTH
has successfully challenged the
might of cable television with
superior quality of broadcasting
and a clear technological edge.
There are an estimated 47 million
DTH customers in India today,
which is 36% of the Indian TV
households. DTH is adding about
8.5 million customers a year,
four times more than cable
additions. According to Hong
Kongbased consultancy Media
Partners Asia, 42% of all TV
homes in the world will be on DTH
by 2020.
"With that kind of potential
growth, a lot of global private
equity investors will be willing to
back the right candidate,"a senior
consultant with a global
consultancy said adding:
"However, the high amount of
debt and cash burnout continues
to be a worry."
Indian DTH companies have spent
high amount of cash on setting up
the infrastructure in the last 12
years since digistisation was first
introduced in 2003. The companies
are highly leveraged as they have
been fighting hard from to keep
rising prices under control. The
historical losses have been on
account of investments in set top
"It is to be seen how the next
decade plays out for these
companies who have to now make
deeper inroads into the vast rural
market,"the consultant added.
With compulsory digitisation in
the country and the spur in
consumption of mass media,
companies such as Tata Sky and
Videocon d2h — the satellite
television arm of Videocon Group,
had plans to raise capital from
the public market.
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