Life with FDI

agencyfaqs! News Bureau

NEW DELHI

As the dust settles on the Tuesday announcement by the Government of India to open the window to FDI in print, it's time to take a quick look at the scenario that is likely to emerge.

But before that here is the implication of the June 25 announcement.

What has the Government actually done?

The Government has allowed 26 per cent foreign direct investment in the news and current affairs segment in the Indian media, and 74 per cent in the non-news, non-current affairs segment. For the record, the non-news and non-current affairs sector include technical, medical and specialised journals while business publications fall in the news and current affairs sector. Thus, select and focussed trade and industry magazines, currently operated by the Indian publishing houses, stand to benefit substantially. The rider is that Indian shareholding should be significantly higher than the 26 per cent FDI. Apart from that, editorial control will remain in the hands of the Indian company and three-fourths of the editorial posts will have to be occupied by Indians.

What is the significance of this announcement for Indian print companies?

Simply put, Indian print companies looking to fight the market leaders head on may now acquire the wherewithal to do so. That is, if foreign investors are ready to put in the money they are hoping for.

No doubt, the potential the Indian marker represents is enormous. As a senior executive of Hindi daily Dainik Bhaskar puts it, "Though I don't see investments flowing in immediately, there's huge foreign interest in the English-language newspapers and magazines. Even language media cannot be underestimated as an investment opportunity." Concurs CVL Srinivas, COO, North & South, Madison Media, "India, by virtue of its sheer size, represents a huge market for any foreign investor looking at any industry, media included."

Figures testify his contention. India, with a population of 1 billion-plus has 40,000 publications, of which 40 per cent are in Hindi. Some 15 per cent are in English and they reach about 5 per cent of the population. The rest are in other languages. Says Srinivas, "The size of the advertising pie across all media stands at Rs 9,000 crore. Of that 55-60 per cent goes into print and around 35-40 per cent into TV. With around Rs 5,000 crore going into India, the opportunity is immense."

Who stands to gain?

Currently, two large publishing houses have alliances - without any equity participation - with foreign print media companies. The Financial Express (of the Indian Express group) has a content tie-up with the Wall Street Journal since 1997. Again, New Delhi-based financial daily Business Standard (owned by the Kotak Mahindra group) has an alliance with the UK-based Financial Times since 1996, to use their financial content and business management supplements. Due to previous Government norms, both these relationships didn't involve any equity participation. The Mid-Day Group of Publications also has a small FDI stake through its IPO raised in 2000 for Mid-Day Multimedia Publications.

For one, the Business Standard brass has gone on record saying it expects British media firm Pearson Plc, the publisher of the Financial Times, to now take a stake in the paper. Talking to media persons on Tuesday, editor and publisher of the Business Standard, TN Ninan, said, "We hope our existing relationship with the Financial Times will be strengthened now to an equity investment."

Watching with bated breath is Dow Jones and Co, which had earlier sought Government approval for a wholly owned Indian unit. A Delhi-based media professional adds, there are quite a few others waiting in the wings. "Indian companies, which may appear to be attractive investment opportunities, are the Hindu group of publications and the Living Media publishing group. Existing financial content and data processing companies like Reuters, Bloomberg, Dow Jones and AFP - that currently operate in India through their 100 per cent subsidiaries - will inevitably seek fresh tie-ups."

Then what was the debate all about?

To begin with, this was perhaps the most contentious issues rankling the media industry splitting it right down the middle. Reports indicate six newspaper groups were vehemently opposed to FDI in print. They were: The Times of India group, Hindustan Times group, The Hindu, Eenadu and the Malayala Manorama group. FDI supporters included, Indian Express, India Today, Pioneer, Ananda Bazar, Rashtriya Sahara, Mid-Day, Business Standard, Dainik Jagran, Mail Media, Reader's Digest, Business India, Magna Publications (Stardust, Savvy etc), Bombay Samachar and Chitralekha.

The first group fought the idea suggesting a threat and misuse of Indian media by larger print and media houses overseas. On the other end of the spectrum were the supporters, the smaller groups that were waiting for cash infusions to help them get a grip on the market. They argued in their editorial columns that ‘national interest,' was the euphemism of the large newspaper groups for their own vested interest. They have carved out geographical monopolies across the country at the cost of smaller newspapers and would like this cosy situation to continue.

Soon after the Government announcement, this group hailed the decision saying it would give the print media a "more level-playing field" because it had been losing out "in growth and reach" to the television industry which has no curbs on foreign ownership. And media stocks soared in the market.

As the full impact started sinking in, most media shares began retracing their way back over their Wednesday and Thursday gains. A Mumbai-based stock market analyst points out, "Most stocks fell on profit-booking as none of the media companies who had pushed the cause of FDI in print announced any plans to induce foreign partners as was widely expected. Also, the market realised it will be a while before actual investments start flowing in." Adds a banker based in the country's financial capital, "Any foreign investor would like to evaluate the market dynamics first and the implication of the decision before they plan to invest. I doubt there will be a rush of deals soon."

Both these groups agree on one thing though. While the last two day's events do not say much, the latest Government decision on FDI in print will change the media landscape forever. © 2002 agencyfaqs!