Mumbai: There has been a lot of activity in the media and entertainment sector of late. The buzz in the space has been in terms of either private equity players striking a deal or mergers and acquisitions taking place in this sector.
Private equity player Warburg Pincus has struck a deal with the Dainik Bhaskar Group at a value of Rs 1500 million. Blackstone has invested in the Eenadu Group and the deal value was worth Rs 11, 925 million. New Vernon has invested in the Jagran Group.
Zee has struck a deal with Ten Sports and the Times of India Group with Sandesh. The deals were valued at Rs 2,500 million and Rs 270 million respectively. TV18 is partner to Time Warner and NBC Universal in their Indian broadcast ventures.
The latest news is that Rupert Murdoch's News Corp is in talks with India's Sun group, which operates the Sun TV Network Ltd, to launch a tabloid in India. Experts feel the media space, especially print and TV, is seeing a phase of consolidation.
Brokerage firms like UBS are betting on the Indian media sector. According to their research report on the same, they have forecasted a 20 per cent revenue CAGR for the Indian media industry over the next five years, driven by a favourable economic environment and increasing investment in the sector as it opens up.
They feel that the Indian media stocks will continue to trade at premium valuations, given their high growth potential over the long term and strong growth in the near to medium term.
According to brokerage houses, newer segments like the Internet and the radio will grow at a faster rate. The UBS report says the two above-mentioned segments will grow at a faster rate at 30 to 60 per cent and traditional segments like print and television are likely to grow at 15 to 20 per cent.
Government liberalisation policy in opening up the sector for foreign investments will be the main driver of growth. Economic growth is helping the sector in its uptrend movement and if there is any slowdown, it will make a negative impact on the sector as it will dampen consumer demand.
UBS has initiated coverage on companies like Entertainment Network India, HT Media and Sun TV. It has given a buy ‘rating’ on ENIL and HT Media and ‘reduce’ rating on Sun TV.
The sector has risks like competition from new ventures, existing companies and regulatory problems. According to the UBS report, high growth is likely to attract competition, which can impact market share and hence revenue. In television, entry is fairly easy as capex requirements are not high and regulatory restrictions are minimal.
Media stocks have been performing well in this calendar year. Companies like BAG Films, Balaji Telefilms, Deccan Chronicle, ENIL, HT Media, Jagran Prakashan, NDTV, Sun TV, TV18, UTV have respectively beefed up gains by 371 per cent, 30 per cent, 23 per cent, 58 per cent, 22 per cent, 27 per cent, 43 per cent, 12 per cent, 20 per cent and 13 per cent between January 2 and May 9, 2007.
To de-risk themselves, some of the companies have or are in talks of venturing into new spaces. Television Eighteen’s internet space, Web18, has entered new genres like travel and tourism, ticketing, home shopping, recruitment, cricket, e-broking etc.
(Source: Moneycontrol.com)
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