By Nandita Bose
MUMBAI (Reuters) - Reliance Broadcast is in talks with several private equity players and strategic investors to raise 3-4 billion rupees ($64-$86 million) through a fresh equity issue, sending its shares up more than 5 percent on Monday.
The Anil Dhirubhai Ambani Group firm, which runs its radio business under BIG FM and has launched three English entertainment channels under its joint venture with a division of CBS Corp, plans to expand footprint across the country.
"We are in talks with a bunch of players both private equity and strategic investors...we hope to conclude the deal by the next quarter," Chief Executive Tarun Katial told Reuters in an interview on Monday.
"The promoters are not going to dilute. It will be more like the expansion of the equity base," he said. As on June 30,2011 the founder holding in the company stands at 63.87 percent.
The firm, which has a total debt of 1.2 billion rupees on its books, has mandated Yes Bank for the transaction and hopes to conclude the deal in the next quarter.
At 10.28 a.m., shares of the company, which have fallen 11 percent since the start of this year compared to a 23 percent fall in the main index, traded up 3.32 percent at 77.85 rupees in a firm Mumbai market.
"The funds will help us expand our radio business and this is one area where most of our fund requirement and fund infusion will go into," Katial said.
In July, the government raised foreign direct investment in the radio sector, which is estimated to have a market size of 12 billion rupees in India, to 26 percent from 20 percent and green lighted an auction of more spectrum for radio to raise 17.33 billion rupees.
The company, which has earmarked investments of 2-2.5 billion rupees in capital expenditure and operating expenses on the upcoming Phase 3 of FM radio auctions, hopes to have around 100 radio stations after the auctions end.
"We have to see how the bid prices go and how the e-auction turns out..We are going to follow a very cautious approach and then we can go and cover the entire footprint," Chief Financial Officer Asheesh Chatterjee said.
The radio business, which operates at close to a 20 percent margin and contributes 60 percent to the overall revenues, is expected to grow 20 percent in FY12, Chatterjee said.
"Once the phase 3 auctions complete we can expect a growth rate of 30 percent in the radio business," he said.
The company posted a consolidated net loss of 291.3 million rupees on total income of 745.3 million rupees in the quarter ended June.
Reliance Broadcast, also said it is in talks with several global players for a strategic tie-up in its intellectual property (IP) business and hopes to announce a deal by the end of the Dec quarter.
Earlier this year Walt Disney, the largest shareholder in UTV, had proposed to buy most of the shares it does not already own in the company, and delist them from all bourses, in one of the largest deal so far in the Indian entertainment space.
Reliance Broadcast, which runs its fast growing IP business under Big Live, monetised intellectual properties such as the Marathi Entertainment Awards, BIG Star IMA Awards and BIG Star Entertainment Awards last year.
The firm, which has seen its radio and television production business turn profitable is waiting for a turnaround in its television broadcasting business, Chatterjee said.
Reliance Broadcast, sees its television business- a major driver for growth in the coming years- turning profitable by FY15, and contribute an additional 20 percent to the overall revenues of the company from the fourth quarter of FY12.
"The TV broadcast business should be profitable by FY15 factoring in all the additional launches which will happen... We hope to launch one more regional hindi general entertainment channel in the next fiscal," Chatterjee said.
The firm also plans to invest 500-600 million rupees in its television business in FY12 from the cash flows generated by the radio business.
Reliance Broadcast, which signed a tie-up with European entertainment network RTL Group in May, plans to launch 2 channels under this partnership.
"The first channel which will be an action entertainment channel will be launched in the third quarter of this year and the other one will launched next fiscal," Chatterjee said.
($1 = 45.84 Rupees)
(Reporting by Nandita Bose; Editing by Subhadip Sircar)