Sony to buy ETV channels for Rs2,600 crore

Sony Entertainment Television and Hyderabad-based Ramoji group are set to ink what could be the country’s biggest media deal, at an estimated Rs2,600 crore.

Going by sources, the deal, which will see Sony take control of 11 of the 12 channels in the ETV basket, owned by Ramoji Rao’s Ushodaya Enterprises, will be concluded by the end of this month.

“In less than a month, we should see the deal coming through. Except a few issues that are required to get legal approvals, there is no major roadblock,” a source said, adding that the valuations worked out are attractive for both Ramoji group and investor JM Financial, which is selling its stake Ushodaya.

Nimesh Kampani-led JM Financial had bailed out Ramoji Rao about three years back, when Eenadu was under financial pressure and the political establishment under former chief minister YS Rajasekhara Reddy had unleashed an attack on the group’s financial arm — Margadarsi Finance.

“At a time when Ramoji group was turning every possible stone for funds, JM Financial had invested about Rs2,600 crore towards 36% equity in Ushodaya Enterprises,” the source said.

JM Financial was keen on exiting and Ramoji group was not keen on buying the equity back owing to the issues related to funding, the sources said, adding that JM Financial had also taken the responsibility of scouting for a buyer, said the source.

The three-month-long due diligence has resulted in a valuation of about Rs3,200 crore, excluding Eenadu, ETV2 and Priya Foods.

The deal under consideration involves creation of a new entity to which the 11 TV channels would be transferred, with Ramoji Group and JM holding 64% and 36% stake, respectively, just as in the current company. This entity would then be demerged and the holdings swapped, giving 100% ownership of the new entity to JM and 100% ownership of Ushodaya to the Ramoji group.

This will leave Ushodaya with three assets —
Telugu news daily Eenadu, Telugu news channel ETV2 and processed food maker Priya Foods.

The 11 ETV channels going into Sony’s fold include one — ETV, the oldest in the basket — Telugu, four Hindi and six other regional channels.

“Post the deal, Ramoji group will have 100% ownership of these three outfits. Sony would take full control of the balance of the organisation. For this, there is a demerger planned. The share swap is also being accordingly worked out,” the source said.

Interestingly, apart from getting full ownership of the three key entities of the company, Ramoji group would also get back about Rs500-600 crore.

“If you look at the media valuations, there is a dent for the investor in most of the deals. However, in the current deal, there is no erosion in the investment that was made by JM Financial,” the source said. “Additionally, the assets that are being transferred are revenue earning.”

Interestingly, though the non-Telugu assets are being shown as key to the deal, sources said the oldest channel in the basket, ETV, which like ETV2 is Telugu, has a valuation of about Rs1,000 crore.