Jagran to acquire Radio City: Why it's a win-win

But even if the radio channel clocks full year earnings of Rs 25 crore, the deal has been valued at 20 times earnings, attractive for an industry that was the fastest-growing among all media (print, TV and films being the others) last year.

But more than being valued decently, under its new owners, Radio City will derive the benefit of having a cash-rich parent. MBPL was owned majorly by a private-equity fund and having a powerhouse media firm as promoter should work to its advantage in the fast-growing radio industry.

Most of Radio City’s rivals are owned by deep-pocketed promoters such as Red FM (Sun Group), Big FM (Reliance ADAG), Radio Mirchi (ENIL – promoted by Times of India), Oye FM (India Today) and Fever (HT Media).

For Jagran, the acquisition consolidates its position as one of the country’s biggest media firms and complements its existing offers, as its CMD Mahendra Mohan Gupta pointed out in a release. “The radio business will complement our print outdoor, activation and digital business and enable deeper inroads with advertisers both at national and local level,” he said.

Radio City operates 20 channels through the country. The rivals: Red (49), Big FM (47), Radio Mirchi (32), Oye FM (7) and Fever (4). There are also others such as My FM (17) and Dhamal (10) that focus on non-metros.

According to a FICCI-KPMG report, radio outpaced other media industries last year with a 15 percent growth and is expected to grow at an annualized 18 percent rate till 2018.

The radio industry could double its revenue to about USD 656 million (or Rs 3,900 crore) in four years, according to consulting firm TechSci Research.

The growth in the radio industry is expected to be led by two things: an explosion in listenership with the government planning to sell 839 frequencies in 227 cities in its phase 3 radio expansion (covering every city with a population of hundred thousand and above); as well as its increasing importance as a tool for advertisers.

“Today Radio is considered as an additional advertisement medium in these cities over TV and print media, due to its limited reach,” Karan Chechi, research director at TechSci, told a website in an interview recently. “The Phase-III auction will transform the industry by positioning it as an important advertisement medium.”

Also, as a result of the economic slowdown, “clients are being forced to reevaluate their media mix as their advertising budgets are constantly under pressure,” the KPMG-FICCI report pointed out. “There has been a tendency to shift focus from nationwide pure brand-building to more tactical, local, focused promotional targeting. This played in radio’s favour as it enables local reach to advertisers increasingly looking to target specific audiences and at affordable pricing.”

Globally, radio accounts for 7-8 percent of overall ad spends while in India, the figure is pegged at 2 percent.

The high growth will also attract well-heeled competitors, with the TRAI proposing last year to increase FDI in the industry to 49 percent from 26 percent currently (which was increased from 20 percent in 2011).

The industry could additional benefit from a potential lifting of their ban from broadcasting news, after the Supreme Court last year questioned the government about its decision.