Reliance Industries consolidation of Network18

To be India’s largest media powerhouse, Reliance Industries does a major consolidation of businesses into Network18

In a piece of breaking news that was received late last night, Reliance Industries surprised the market with the announcement of the consolidation of its media and distribution businesses spread across multiple entities into Network18.

Under the Scheme of Arrangement, TV18 Broadcast (NSE: TV18), Hathway Cable & Datacom (NSE: HATHWAY) and Den Networks (NSE: DEN) will merge into Network18 Media & Investments (NSE: NETWORK18). The Appointed Date for the merger shall be February 1, 2020. It is believed that the Board of Directors of the respective companies approved the Scheme of Amalgamation and Arrangement at their meetings held today.

The broadcasting business will be housed in Network18 and the cable and ISP businesses in two separate wholly-owned subsidiaries of Network18. This restructuring, according to the company, is expected to create a value-chain integration, and render substantial economies of scale. The Scheme shall also simplify the corporate structure of the group by reducing the number of listed entities.

Reliance believes that this aggregation of a content powerhouse across news and entertainment (both linear and digital) and the country’s largest cable distribution network under the same umbrella shall boost efficiency and exploit synergies, creating value for all stakeholders.

The company also believes that the media industry is accelerating towards being a B2C play, led both by market factors and through regulation. An integrated media play shall further increase the breadth as well as the depth of the group’s consumer touchpoints and allow for retaining a larger share of the consumer’s spend on content. The reorganization furthers the group strategy of building a media powerhouse that is agnostic across pipes, platforms and screens.

Shareholders of all the four companies will benefit from streamlining of operations and strategy, focused management, and reduction of risk through consolidation.

Network18:- Will be an integrated media and distribution company with a revenue of ~Rs. 8,000 cr; Will scale-up as one of the largest listed players in the sector; Will be net-debt free at a consolidated level, providing a solid base for growth as well as improved shareholder returns; Will benefit from a balanced mix of cyclical and annuity revenues to unlock growth while ensuring stability; and Will create an eco-system for growth opportunities in digital, broadcast media, cable, and broadband.

The consolidation of cable businesses of Den and Hathway in one entity will leverage the combined strength of the ~27000 LCO partners who act as the touchpoints to ~15 mn households in India; delivering localized, people-friendly and ultra-fast customer services. The combined Broadband entity will serve ~1 mn wireline broadband subscribers across the country.

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