A decision has been taken by the board of Entertainment Network (India) Ltd (ENIL) to sell its entire stake of 83.4 per cent in the out-of-home arm, Times Innovative Media (TIM), known as Times OOH, to parent company, Bennett, Coleman & Co Ltd (BCCL). BCCL, in fact, also had a controlling stake of 71 per cent in ENIL. Apart from the OOH business, ENIL runs a radio channel and an event management company.
Sunder Hemrajani, managing director, Times OOH confirms the news to afaqs!. "Yes, Times OOH is now a direct subsidiary of BCCL." He also informs that there will no changes at the operating level; this is just a shareholder level transaction.
N Subramanian, group chief financial officer, ENIL, tells afaqs! that apart from other reasons, the board reached this decision due to the amount of investments that have been made in the OOH arm, and the size of fresh investments that need to be made.
The nature of the two businesses, radio and OOH, is very different and both require capital investments. Phase III of radio licensing is expected to require sizable investments, more than Phase II, as the government is also promoting consolidation.
At the same time, ENIL has made substantial investments in OOH as well. It was worked out that at this rate, about 70 per cent monies would be locked in OOH, a media where investments are being made in anticipation of returns. Thus, the board reached the decision to sell its stake in the OOH business to BCCL. ENIL plans to use the proceeds of the sale to boost its radio business.
Subramanian shares that the equity valuation of the 83.4 per cent stake is Rs 45 crore. However, as part of the transaction, Times OOH also has an investment commitment of Rs 70 crore, which BCCL will take care of, as well as its financial guarantee obligations, which are to the tune of Rs 31-32 crore. As part of this purchase, BCCL will also take care of ENIL's debt given to OOH, which is Rs 42.5 crore.
Subramanian informs that other strategic partnerships were also being discussed, but the decision to transfer stakes to the parent company made most sense. The deal is underway and should be completed in the next month.First Published : July 12, 2010