Network 18 to sell Newswire18 stake, stock jumps 4%

Shares of Network 18 Media & Investments gained as much as 3.8 percent intraday on Monday, immediately after the company said it would sell its shareholding in Newswire18.

"Network18 will receive Rs 90 crore," from the sale, the company said in a release sent to exchanges. The company sold its entire stake in NewsWire18 to PE firm Samara Capital. In an interview to CNBC-TV18 Sarbvir Singh, head of investment, Network 18 spoke about the deal. The transaction will add Rs 70 crore in company's pre-tax profit and Newswire18 will be rechristened in next 90 days, Network 18 said. However, the stock came off day's high on profit booking. At 12:48 hours IST, the stock rose 0.54 percent to Rs 46.30 on the Bombay Stock Exchange. Below is the edited transcript of Sarbvir Singh's interview with CNBC-TV18. Q: Could you walk us through the rationale behind the deal? Would you be booking this Rs 90 crore in the coming quarter itself? A: The rationale behind the deal is that as we have always said we want to focus our business into three core areas; television, digital content and commerce. NewsWire18 while a very interesting and a growing asset, did not fit our core business strength and areas, so we have sold our stake to Samara Capital. The total proceeds that we will get is Rs 90 crore. We expect to book a profit of Rs 70 crore in Q3. Q: Will there be more such inorganic moves, we did see a bit of a stake sale in bookmyshow.com? A: This year we have done over Rs 200 crore of stake sales including primary and secondary sales. In the next six-twelve months, one should expect to see more a few more. Our stated goal is that we want to generate about Rs 500 crore from our asset sales and we are well on track for that. Q: Rs 500 crore by when? Is this something for this fiscal that you have in terms of your target? A: Not for this fiscal. In this fiscal we have done about Rs 200 crore and then in the next twelve months, we should get the remaining Rs 300 crore. Q: Will you be using this to pare down your debt? A: Our debt is now reasonably under control after the rights issues. This is more to strengthen our balance sheet and allow us to focus and invest behind our core businesses. Q: Have you highlighted which more of your investments could be up for sale? A: We have not disclosed that specifically, but we have a few transactions in the pipeline. Q: What was the contribution of NewsWire18 in terms of revenues or in terms of debt? Will your debt come down because you have sold off the company? A: In terms of revenues, NewsWire18 has been on a run rate of about Rs 11 crore to 12 crore a quarter. It is a profitable business. In terms of debt, there is no direct correlation with external debt, but certainly it gives the company Rs 90 crore more to strengthen our balance sheet and decide how we want to use that money. Q: What exactly do you have in mind when you say to strengthen your balance sheet? A: It gives us cash and allows us to decide what to do with it. We can either choose to reduce our debt further, which is already now at fairly low levels or it could allow us to keep the money in reserve for other activities. Disclaimer: Moneycontrol.com is part of the Network18 Group.