RIL-TV18 deal benefits Ramoji Rao the most

The complex deal worked out by TV18 and its promoter, Network 18, for acquiring stake in ETV channels with the backing of Reliance Industries (RIL) is a win-win proposition for all the parties involved — particularly ETV’s founder and media baron, Ramoji Rao.

Rao-controlled Ushodaya Enterprises Pvt Ltd, which owns all the assets, including the channels that would go into the TV18 fold, has been a mute spectator on the sidelines as RIL worked out a deal to sell its interest in the channels to TV18.

However, sources in the Eenadu group told DNA, the exit of RIL by transfer of interest has resulted in consolidation of Rao’s holding in the group’s flagship Eenadu Telugu daily and the food business arm, Priya Foods.

Though the channel of fund flow is still undisclosed, RIL had invested about Rs2,600 crore in Ushodaya five years back, acquiring stake in all the businesses and assets of the media group.

The exit route was prepared by working out a formula that would benefit both RIL and Rao.

“The restructuring of assets was always the key to the exit of RIL. By investing in Ushodaya, RIL had acquired stake in Eenadu newspaper, too. But, the Eenadu group was keen on retaining the print media business for itself without allowing any outside investor picking up stake in it,” said the source.

According to the exit formula, the channels were demerged and placed in three different baskets, leaving Ushodaya with Eenadu newspaper and Priya Foods.

The valuations were worked out in a way that RIL would get either complete or partial control of the baskets in which the TV channels were placed. In return, Eenadu newspaper and Priya Foods would be 100% owned by Ushodaya.

“Technically, RIL would hold 39% in the newspaper. However, the formula came into play and the shares were swapped so the flagship business could stay with Rao,” said the source.

Post the share swap, RIL through its investment vehicles has 100% control over the non-Telugu regional news channels including ETV Uttar Pradesh, ETV Madhya Pradesh, ETV Rajasthan, ETV Bihar and ETV Urdu.

In Telugu channels ETV and ETV News, it has 49% interest. It also has 100% interest in non-Telugu entertainment channels including ETV Marathi, ETV Kannada, ETV Bangla, ETV Gujarati and ETV Oriya.

Following the deal with TV18, RIL would divest its 100% interest in regional news channels, 50% interest in non-Telugu entertainment channels and 24.5% interest in Telugu channels.

For the baskets where RIL has divested partial interest, Viacom 18, a 50-50 joint venture between Viacom Inc and Network 18 group, is likely to evaluate the option of picking up the residual interest at a later stage.

“The management control over the Telugu channels would continue to be with Ushodaya. TV18 would remain a key investor in the channels for now. However, while working out the exit formula, the key task was to secure 100% ownership of Eenadu newspaper for Rao,” the source said.