This post has been corrected.
Reliance Industries, India’s largest private sector company, could potentially spend up to 55.6 billion rupees (around $942 million) to acquire a controlling stake in Network 18 Media and Investments, a vast Indian media house which owns everything from business news television channels to a home shopping website.
But Raghav Bahl and his wife Ritu Kapur, who built the diversified media group from scratch starting in 1993, will receive only 7 billion rupees (around $119 million) upfront by selling their stake, according to documents filed with India’s stock exchanges. Emails to Bahl and Reliance seeking comment were not immediately returned.
The couple control the entire conglomerate through stakes in a maze of six holding companies, and have substantially sold down their ownership in these companies through the years to fund the group’s expansion, offset mounting losses in some units, and pay off debt. Over the years, Bahl partnered with international companies including Viacom, and started a host of new ventures, like fast-growing internet news site FirstPost.
Bahl resigned today. His media properties were broadly run under three publicly-listed companies: Network 18 Media and Investments, TV 18 Broadcast, and Infomedia Press.
Reliance Industries (RIL) is buying into the six holding companies in a four-step deal that will give it complete control:
1. Back in February 2012, RIL invested 22 billion rupees ($375 million) in a debt instrument issued by promoter companies of the TV 18 group. This instrument has an option to convert into shares, an option that RIL said it would exercise May 29.
2. On May 29, RIL said it would acquire Bahl and Kapur’s shareholding in the six promoter companies for 7 billion rupees ($ 119 million).
3. After step 2 is finished, RIL will lend 3.5 billion rupees ($59 million) to the promoter companies to pay off some liabilities.
4. Then RIL will buy 26% from minority shareholders in the three listed companies for a total cost of 22.9 billion rupees ($389 million). Thus, the total cost for Reliance works out to 55.6 billion rupees ($942 million).
Meanwhile, Rajdeep Sardesai, the editor-in-chief of IBN 18 Network, which includes English and local-language news channels, will receive around 164 million rupees ($2.7 million). His shareholding was last disclosed in August 2012, when he held 1.5% in Network 18 Media & Investments. Sardesai’s shareholding fell below 1% after the company issued more equity, and listing regulations do not require companies to list shareholders owning less than that threshold.
Besides ownership in the holding companies that control the media conglomerate, Bahl and Kapur hold 240 million rupees ($4 million) worth of shares themselves in two of the group’s publicly traded companies, TV 18 Broadcast and Network 18 Media and Investments. Should they choose to sell their shares when RIL makes its open offer, they would receive an additional 7.3 billion rupees ($124 million).
Correction: A couple of points were unclear in an earlier version of this post due to editing errors, which have now been fixed.