Reliance Big TV to divest 20 % stake to PE firms

Reliance Big TV Ltd, the promoter of Big TV direct-to-home (DTH) services of Anil Ambani’s Reliance Communications, is in final talks with private equity (PE) firms Carlyle Group and Providence Equity to sell a minority stake and raise capital.

Deutsche Bank has the mandate to facilitate the deal for the DTH service provider, according to sources, who add that Big TV is looking to divest about 20 per cent stake in tranches, of which 10 per cent will be sold now for around $ 50-60 million.

Carlyle has emerged as the front-runner to clinch the deal and the DTH expects to close the deal in second quarter of 2009-2010, sources said.

Rajeev Gupta, managing director, Carlyle Group, said, “In all investment evaluation situations, we are bound by confidentiality agreements. We would violate the confidentiality contracts if we commented in any way on any situation.”

A Reliance ADA Group spokesperson declined to comment when contacted by Televisionpoint.com, saying Reliance ADAG is committed to its shareholders and will continue to explore various options to increase the shareholders’ value. An email sent to Biswajit Subramniam, managing director, Providence Equity, did not elicit any response.

A senior Big TV marketing official, who wished not be named, said Big TV requires between Rs 8000-1,000 crore for its expansion plans. While foreign funds can own up to 49 per cent of the company, it is most likely to dilute its equity in stages.

Big TV is the only DTH firm with no foreign investments. All other DTH players – Dish TV, Tata Sky, Sun Direct and Airtel’s digital TV – have foreign investments of about 20 per cent. Government norms allow 49 per cent foreign investment in DTH, with a rider that the foreign direct investment (FDI) cannot exceed 20 per cent within the overall 49 per cent foreign investment cap.

Big TV has about 1.5 million subscribers, almost a third of market leader Dish TV’s user base, which could give it a valuation of around Rs 1,200 crore, based on a mathematical extrapolation of the subscriber base and the valuation multiples enjoyed by its listed larger rival. Dish TV has some 5.10 million users, and at Friday’s close, had a market value of Rs 3,709 crore.

The stake sale could help Big TV, which was launched in August 2008 and has recently signed up Bollywood star Hrithik Roshan as its brand ambassador, expand its operations across the country. The company has been looking at divesting stake since April this year and had initiated talks with a host of private equity firms and strategic investors.

A successful deal would make it the second private equity placement in the DTH space after Tata Sky, which sold a 10 per cent stake to Singapore government owned Temasek for $ 56 million in 2007. Tata Sky currently has around 3.5 million subscribers.