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Cash-strapped TV18 bails out Infomedia’s rights issue

The just-concluded Infomedia18 rights issue was undersubscribed, requiring promoters TV18 to pump in up to Rs12 crore of the unsubscribed portion of the issue, even as TV18 is haemorrhaging cash

It appears that media and entertainment company TV18’s promoters have bailed out its publishing unit Infomedia18’s just-concluded rights issue. A large part of minority shareholders of Infomedia shunned the Rs99.90 crore rights issue. So, the promoters of TV18 decided that the shareholders of TV18 should pony up Rs12 crore towards the expected under-subscription of the rights issue.

The TV18 group had bought Infomedia in 2007, hoping to add print publications to its bouquet of offerings. Infomedia publishes business directories (Yellow Pages), eight consumer titles and 12 trade titles. The business has been draining cash ever since TV18 took it over. In 2008-09, it lost Rs84.65 crore and in the first nine months of this year, it lost another Rs43.15 crore. To sustain the losses, Infomedia chose to make a rights issue which shareholders were lukewarm to.

While it is all right for the ambitious promoters of TV18 to continue to support and bail out an ill-advised move into print media, it leads to a piquant situation for the shareholders of TV18. Money has been flowing out unabated from the coffers of TV18—for the last six quarters at least. Almost all group companies like Infomedia18, Web18 and IBN18 have been reporting losses, unable to sustain the high-cost operations of businesses that have little edge. Indeed, as we reported yesterday, faced with negative cash flows, the companies are being forced to pile on debt in large quantities. But borrowing has its limits. The group has been making rights issues to keep the businesses afloat. A few months ago, TV18 concluded a rights issue to keep its own business going. Now it has supplied Rs12 crore from its own cash-strapped business to Infomedia18.

Last year, in a very ambitious move, Infomedia launched Forbes magazine in India. The magazine was priced at Rs50 in an inaugural offer, which has not been changed so far. The product was pushed through the traditional and primitive print distribution channels, such as hawkers, at enormous cost. Hawkers were given generous incentives to stock the copies. It is not clear whether it has been able to create a niche in the crowded business magazine market. Subsequently, it launched Entrepreneur, a magazine for the small business segment priced at Rs75. These initiatives have only added to the losses so far.

While declaring the results of the December quarter, the company management claimed that “the company is in the process of introducing new technologies in its product offering, so as to cater to newer markets and de-risk the revenue streams. New lines of business are also being added, which along with consolidation of existing products and introduction of new products in the publishing segment are expected to improve the revenues.” However, shareholders obviously remain sceptical about what these new winning products are and whether these would steady the boat.

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    Arun Jethmalani

    1 decade ago

    Empire building is not an original sin, and holds true for many Indian promoters. I agree that shareholders are getting a raw deal, but the root cause might well be the inflated market cap and institutional shareholding they've always enjoyed.

    Clearly, the promoters are playing a market cap game, and successfully so far! Their aim appears to be to eventually sell out to an international media company, and as long as investors support them, they will continue to build empire!

    Who knows what the right strategy is? Indian media companies are popular as international media is desperate to get into one of the most attractive future markets.

    As for me, I would stay away - there are plenty of profit-making companies out there.

    Sanjoy Narayan

    1 decade ago

    Forbes India has increased their cover price to Rs. 100/-. Facts should be correct. Opinions we can always have.

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