Nimbus Comm's Rs 552 cr capex plan

RELATED NEWS Set India not bidding for ICC media, sponsorship rights Nimbus vs Prasar Bharati: Cricket fans let down Nimbus attracts Rs 552cr pvt equity invt from 3i,Cisco,OIF ALSO READ See latest News about Nimbus See previous management interviews See what other Experts & Brokerages are saying about Nimbus BSE | NSE 01/01/70 Are Mutual Funds betting on ?

3i, Cisco and Oman International Fund have invested Rs 552 crore in Nimbus Communications. Harish Thawani, Chairman of Nimbus and Anil Ahuja, MD of 3i India comment on the deal.

Thawani states that the reason behind raising the money is to expand the business in their sports management company, which has a leading share in the business of cricket.

Nimbus now wishes to expand that to football and golf across Asia and thereafter to Europe. They are also examining broadcasting opportunities in areas other than sports, adds Thawani.

Ahuja states that the Nimbus investment is significant as the media space in their view is driven essentially of two fundamental drivers- cricket and films. With this investment 3i is positioning for both. He adds that the percentage holding will depend on the exact conversions.

Excerpts from CNBC-TV18's exclusive interview with Harish Thawani and Anil Ahuja:

Q: What is the real reason for raising this amount of money Rs 552 crore and where are you going to be deploying it?

Thawani: The real reason is the stated reason, expanding the business in our international sports management company, which has a very strong footprint, and a leading share in the business of cricket. We now want to expand that to football and golf across the region initially in Asia and possibly thereafter in Europe.

The second part of the expansion of the business is to look at beyond sports broadcasting which we have launched in October 2006 with NEO Sports and NEO Sports Plus channels, which are distributed by Star in India. We are examining broadcasting opportunities in other areas of entertainment outside of sports.

The third area where we will be investing is the acquisition of film rights replicating a cricket model which is an end-to-end solutions provider and the business of film entertainment, managing the rights, distributing them theatrically, electronic platforms both in India and internationally.

Q: 3i has already invested some amount about USD 45 million for 33% stake in your company - could you also throw more light on what the stake holding would be of each of these entities through this Rs 552 crore infusion?

Thawani: At the moment what we have done is, in this round which is approximately USD 125 million as about Rs 552 crore, these are issued by way of mandatory convertible bonds which will convert prior to an IPO or a trade sale.

There is a preset formula and there might be a range between which the conversions will happen. Post conversion the promoter group which is led by me would have an holding somewhere between 40-45%, therefore the private equity and employee holding will increase to somewhere between 55-60% post conversion.

Q: Throw the light on the fact that you are looking at coming to the secondary market, you are looking at getting your company listed - how soon can we see that become a reality and what is the game plan on that front? How much of money would you be looking at raising from the equity markets?

Thawani: I think the company is not likely to require funds in the next three years. We are fairly well stacked with cash and very positive earnings. Consequently the move to list the company will be more for the purposes of liquidity rather than for the purposes of raising any new money and we expect that we could list anywhere between one-three years from now.

Q: Is this your complete fund raising plan as of now or are you going to be looking at more fund raising options in the future?

Thawani: No, I think our next three years expansion is pretty well funded. We are virtually a zero debt company, so there is headroom for leveraging also.

Having said that we have been able to set a cracking pace of growth in the last five years more than 70% YoY of late and if that kind of growth momentum continues and more opportunities come in the company's way, who knows, but I don't visualize that over the next two-three years we are likely to need to raise any further money.

Q: The tie-up that you have now with Nimbus, what are your plans with the company and more importantly this 33% stake that you already had with this fresh infusion of capital where is your stake go upto in the company?

Ahuja: Actually the way we look at the Nimbus investment, if you just step back and look at the entire media space, the media space in our view is driven essentially of two fundamental drivers; one being cricket, the other being films. I think with Nimbus we are positioning ourselves for both.

 The percentage holding will depend on the exact conversions but I think we will in any case end up at about 30% across the two rounds of investment that we have done. What are our plans with Nimbus, I think it's for Mr. Thawani to lead us and we will support. I don't think there is much to add on that one.

Q: There is an imbroglio, which is happening in the court right now with Nimbus filing a petition against DD for the unencrypted signals that they have been demanding from you. What is the status on that and how do you expect things to proceed from here on?

Thawani: Firstly let me make it clear, I think there has been and I am saying this on the record, I think there has been very substantial misinformation being spread by interested parties at Doordarshan. We have given it in writing to Doordarshan that we will provide them a clean feed without commercials for transmission onto the terrestrial network as per the purported guidelines.

Whether those guidelines are being interpreted correctly, they have the force of law or not,these are questions that the court will eventually decide; it's not for me to decide on that on them. But respecting the guidelines even though they may not have the force of law or they being possibly misinterpreted, we have gone ahead and said take the feed. I want to essay this very clearly Doordarshan declined.

So that is where the issue of sharing the feed lies. Whether these guidelines are legally tenable, whether they are being interpreted correctly, that's the question that we have taken before the court.

Having said that the issue of encryption is a fairly simple issue. Everybody in the broadcasting business understands that. You cannot send a satellite signal across the country and into the region unencrypted and defacto send an invitation to pirates to steal the signal, run it on cable, DTH or whatever.

It hurts the interest of licensees from countries as far away as Hong Kong in the East to Middle East and the West etc. The commercial rights about the parties, Doordarshan wants terrestrial, they are welcome to have it.

Despite these reservations for the first match, which we said, you can have the entire feed unencrypted and so on and so forth. They didn't take it for reasons best known to themselves, possibly because they understand its not possibly tenable to do so and I think in the next few days the courts will probably form a view on what is the correct position in so far as these guidelines are concerned and what constitutes the constitutionally valid and tenable set of guidance. You may have guidelines that say anything. But they have to be constitutionally tenable.

Q: Distribution of new sports and a lot of people would want to know as to how things are panning out on that front?

Thawani: Distribution for us is fortunately handled by Star India, which has as you know the largest broadcasting business in the country. They have taken the exclusive distribution rights from us, our information is that we are now connected in an approximately 40 million cable homes of the 60 million cable homes estimated in the country.

We have 14,000 decoders available about 7,000-8,000 of those have already been connected, any more decoders that are required to connect any cable head ends, any cable operator has to merely ask for it, sign the contract, I think it doesn't take more than 30 minutes.

So we are in the safe hands of Star, we believe we know what they are doing and we believe they have got us exceptional penetration in the short space of time in the major metros.

 We agree that in class I, class II towns more work needs to be done, it is on as we talk, there are more than 60 people in the field collecting headends and I think by the end of this month we will be pretty much on par with any other leading sports network in terms of connectivity.