Mukesh Ambani and Reliance Industries always have a surprise up their sleeves. As a wow move before its AGM, it announced it would acquire a 24.9 per cent stake in television content and movie producer Balaji Telefilms for Rs 413 crore. Earlier too, RIL had acquired media companies like ETV and Network18. The question is: what is a Rs 3.3 lakh-crore oil and telecom giant doing in media besides giving the jitters to established players?
Star India sold its 26 per cent stake in Balaji in August 2015 for Rs 108 crore; so, a four-fold appreciation in less than two years is a good deal for Jeetendra and Ekta Kapoor, the original promoters of Balaji Telefilms. Balaji has been struggling but with the new infusion it intends to move ahead double quick with its own digital over-the-top content arm ALTBalaji, hoping to compete with Netflix and others for the growing netizen entertainment market.
RIL has been on a path of determined entry into media and entertainment. It has maintained that Reliance Jio is not just about providing the pipes for digital communication but also generating and selling content that flows in it. Jio TV and Jio Cinema are part of this plan; and it is the rationale for the Balaji acquisition, too.
The NDTV foray
Now cut to NDTV. When the spotlight was on the CBI raids in June on co-chairmen Prannoy Roy, what escaped attention was the fact that Reliance had quietly acquired substantial interests in the news network. While unravelling the dark mystery of whether NDTV had short-changed ICICI Bank of Rs 48 crore, what also emerged was NDTV had been staving off financial crisis by taking loans from Peter to pay Paul. An initial loan from Indiabulls in 2008 of Rs 500 crore was partly defrayed by taking Rs 350 crore from ICICI Bank. When there was trouble with ICICI Bank, Reliance through 2-3 intermediaries advanced Rs 403 crore to help Parannoy Roy rid NDTV of the ICICI Bank debt.
The buck, then, stopped with Reliance. The Rs 403 crore loan advanced by Reliance group company VSP Ltd to RRPR Holdings, owned by Radhika and Prannoy Roy, is a “zero coupon optionally convertible loan”. Reliance does not ‘own’ RRPR Holdings, which has a 29 per cent stake in NDTV; but it has now a complete lien on the investment vehicle, and can convert the loan anytime into equity. The Roys, separately as individuals, own 32 per cent in the news network.
The earlier acquisition of the Network18 group promoted by Raghav Bahl is a complex operation where in 2012 Reliance first acquired a clutch of ETV news channels owned by Andhra’s Ramoji Rao. These were then merged with Network 18 with the money for the buyout of ETV (Rs 2,043 crore) being advanced by a Reliance controlled entity – the Indian Media Trust. Additional amounts were also provided to Bahl for growth and working capital through ‘optionally convertible debentures’. By May 2014, the OCDs were invoked into equity, and Network18 with its dozen TV channels joined the Reliance family.
Business or clout?
Reliance taking an active position in the media sector can be for two reasons. It may be because the corporate group sees a business opportunity; or the clout that the levers of media provide. The Anil Ambani Group explored the business opportunity with the acquisition of Adlabs in 2005 and a string of multiplexes and movie-making investments. It burnt its fingers and exited. This sector requires niche expertise.
The Reliance press release of January 2012 justified its entry into Network 18 as “Digital content from entertainment, news…and other genres will be a key driver to increase consumption of broadband.”
Reliance Jio has launched a few content offerings but independent producers offer a huge variety of entertainment and news content off the shelf. Should a telecom network like Jio be acquiring expensive news and entertainment sources which can only contribute to a fraction of the demand?
When you are the largest publicly traded company with a $51 billion turnover, you also need to build public perception in your favour. You have to guard your flanks; and when under attack, defend yourself. Network18, NDTV, Balaji Telefilms... There is more to come.
(The writer can be contacted at gurbir1@gmail.com)