Out-of-home (OOH) media advertising, a sector that is getting considerable attention from venture capitalists since mid-2006, is now attracting private equity players as well.
This is the second round of PE funding for the OOH advertising media firm
MUMBAI: Out-of-home (OOH) media advertising, a sector that is getting considerable attention from venture capitalists since mid-2006, is now attracting private equity players as well.
On Monday, Warburg Pincus, the global private equity firm with $35 billion under management, announced an investment of Rs 276 crore (about $69 million) over 12 months in Laqshya Media.
An OOH media advertising company, Laqshya owns and develops advertising assets such as those at airports, transit
systems and street furniture including bus queue shelters, pedestrian bridges and public toilets, and billboards. It is learnt that the investment will give Warburg Pincus a 15% stake in the company.
With this investment, Laqshya becomes the first OOH media advertising company to get a second round of funding from strategic investors.
UTI Venture Funds, the Bangalore-based subsidiary of UTI Mutual Fund, has also invested an additional Rs 25 crore in Laqsya, taking the total investment to Rs 301 crore.
UTI Venture Funds is largely credited with first identifying the sector. The company had picked up a 15% stake in
Laqshya for $10 million (Rs 45 crore) in October 2006.
“There is tremendous scope for growth in OOH media advertising. With ring roads, peripheral ring roads and other
infrastructure coming up all across the country and with people spending more time on the move these days, this medium of advertising makes more sense than traditional television,” said Raja Kumar, managing director and chief executive officer of UTI Venture Funds.
The only other OOH media advertising company in India to have received this level of funding is Times Innovative Media. Goldman Sachs and Lehman Brothers picked up a 16.5% stake in Times Innovative for $50 million in January 2008.
All other previous investments — Matrix Partners’ $4.4 million investment in vJive in December 2006, Sequoia Capital’s March 2007 investment in Digital Signage Network, Draper Fisher Jurvetson’s investment in LiveMedia and Intel Capital’s in Tag Media Network in October 2007 (both around $2 million) — have been smaller amounts typically invested by venture capital funds.
The second round of infusion in Laqshya may open up funding floodgates from PE firms for these companies. “Outdoor media advertising has largely been unorganised. So, even if there are a half a dozen organised players competing against each other now, there is still a very high profit margin to be had, because market share is being captured from the unorganised segment,” says Arun Natarajan, founder and chief executive officer of Venture Intelligence, a firm that tracks the private equity and venture capital ecosystem in India.
OOH Media, seeded by global private equity and venture capital firm 3i under an ‘entrepreneur in residence’ model, is said to have got a few rounds of funding after the $4 million that 3i had initially put in late 2006. However, this could not be independently confirmed.
“For international private equity funds, which have seen the success of this sector globally, this will be a natural sector of choice going forward,” says Natarajan of Venture Intelligence. Focus Media in China and multinational Clear Channel Outdoor are prime examples of OOH media advertising companies that have done well.
Laqshya also seems to have set itself some high standards as far as its international presence is concerned. The company, which already has a strong presence in India, Sri Lanka and the United Arab Emirates, intends to use the proceeds from Warburg Pincus and UTI Venture Funds investments to expand its footprint across the Middle East, Africa and South East Asia.
sanat_vallikappen@dnaindia.net
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