TV content firms catch PE fancy

Heavy domestic demand makes sector lucrative

MUMBAI: Despite the global crisis, the Indian media and entertainment (M&E) sector has been attracting a lot of attention from private equity (PE) firms. The potential of the sector can easily be gauged from the fact that dedicated funds such as Cinema Capital Venture Fund (CCVF) and Vistaar Religare Film Fund (VRFF) have been floated to fund the film production business in the country.

While the television broadcast space has been targeted by PE firms such as Temasek, Kotak, New Silk Route, Com Ventures and SAIF Partners in the past, all eyes are now on production houses that provide software to TV channels.

And the party is just hotting up.

K Srinivas, managing partner of BTS Investment Advisors, said investing in production houses is one of the company’s focus areas in the M&E space. “We see a huge opportunity in addressing the domestic demand from this business community. With so many television channels in circulation and those in the pipeline, the need for compelling content providers is expected to increase drastically,” said Srinivas.

Industry experts say the boom in the television broadcasting space in the last 12-16 months has spawned new production houses. Sensing a lucrative business opportunity, PE firms have begun their groundwork in identifying target companies. “While a lot of them are in the ‘me too’ category, some are interesting creative teams that are putting together compelling content. These are the ones that will be chased aggressively,” said Srinivas.

Another PE firm looking to invest in such firms is Nexus India Capital. In an earlier interaction with DNA Money, its managing director Suvir Sujan had confirmed the company’s intention to invest in this space. “We have already identified a media company and are currently in the due diligence stage,” Sujan had said.

Arun Natarajan, founder and CEO of PE funding research firm Venture Intelligence, said the television broadcast space is especially attractive to PE firms. “It is preferred way of playing out the consumer spending story, given that other avenues such as food & beverages and retail have their own limitations and are not as lucrative,” said Natarajan.

On the possibility of such investments in the coming month, experts said that if it wasn’t for the turmoil in the global financial markets, some deals would have been sealed by now. “If you’d asked me a few months ago, it would have been easier to put a time-frame to closing the deals. But given the current market scenario, those in the negotiation stage will take some more time to close them. The key reasons for the delay are valuations and entrepreneurs’ expectations. I think both the promoters and the PE firms will have to take the real picture into account when arriving at specific valuations,” said Srinivas.

t_ashish@dnaindia.net