How is Quint valued as Haldiram’s owners-backed firm set to buy the news portal?

Credit: 123RF.com

News website The Quint has found itself a new owner, just weeks after the company that operates the portal shuttered a related television division amid the widespread disruption caused by the coronavirus pandemic.

Mumbai-listed Gaurav Mercantiles Ltd said in a stock-exchange filing on Wednesday that it is acquiring the digital content business of Quintillion Media Pvt. Ltd, owned by media entrepreneur Raghav Bahl and his wife Ritu Kapur.

This business includes the English and Hindi websites of The Quint but not the business news website BloombergQuint which it operates in a tie-up with US-based media giant Bloomberg LP.

Quintillion’s decision to sell The Quint comes after it said last month that the BloombergQuint platform will shut down its television division because of the inability to get a broadcast licence from the government. It also said at the time that it would now focus on building the BloombergQuint.com website.

Gaurav Mercantiles also said that it will change its name and shift its registered office from Mumbai to the national capital region, where Quintillion is based.

In the filing, Gaurav Mercantiles said the move would help it gain a foothold in the digital media business. The Mumbai-based company was previously engaged in ship breaking and trading activities, but had no operating revenue for the 2018-19 financial year. The transaction essentially means the Quint is going for a reverse stock market listing.

As per the filing, the transaction will involve Gaurav Mercantiles acquiring Quintillion Media’s digital business on a “slump sale basis”. The Mumbai-based company will acquire Quintillion at an enterprise valuation of Rs 30.58 crore (about $4 million) and an equity value of Rs 12.62 crore ($1.66 million).

The equity value is 1.13 times Quintillion’s revenue of Rs 11.1 crore for the financial year through March 2019. The enterprise value, which takes into account debt and cash in hand, is a tad less than three times the top line.

The acquisition is a related-party transaction as shareholders of Gaurav Mercantiles include Bahl, Kapur and Mohan Lal Jain, who is also a director on the board of the holding company of Quintillion Media.

Bahl and Kapur owned a total of 66.4% stake in Gaurav Mercantiles at the end of March, stock-exchange data showed. They had acquired this stake in late 2018.

Elara Capital Plc, a UK-based investment bank that specializes in offering services to mid-sized companies, and the Delhi-based Agarwal family of Haldiram Snacks will be other key shareholders of the media company as they own convertible warrants in Gaurav Mercantiles.

While the new shareholding structure could not be ascertained, VCCircle estimates indicate that Bahl, directly or through investment entities, will retain a 68.8% stake in Gaurav Mercantiles after the warrants are converted.

The estimates also suggest that the Haldirams owners will hold around 17-18% of Quintillion Media while Elara Capital will hold close to 9%.

When contacted, Bahl declined to say anything that wasn’t already mentioned in the stock-exchange filing. VCCircle has also reached out to Haldiram Snacks regarding the acquisition and will update this report accordingly.

Shares of Gaurav Mercantiles Ltd ended the day 4.17% up at Rs 250 apiece. Stock-exchange data show the company’s share price has jumped five times in the past year, from a 52-week low of Rs 43.85 to a high of Rs 255.75.

Bahl had set up Quintillion Media in 2014 after leaving the media group Network18, which he had founded two decades before and eventually sold to billionaire Mukesh Ambani-led Reliance Industries Ltd.

Quintillion Media’s net sales grew quickly in recently years, from Rs 3.3 crore in 2016-17 to Rs 7.25 crore the following year and Rs 11.1 crore for 2018-19, according to VCCEdge, the data research arm of Mosaic Digital.

However, the company remained deep in the red because of high costs. Its pre-tax loss expanded from around Rs 29 crore for 2016-17 to Rs 38.6 crore the following year and Rs 46.7 crore for the year through March 2019.

Bahl set up BloombergQuint in 2016 in a joint venture with Bloomberg. The business news website is run by Quintillion Business Media Pvt. Ltd, a subsidiary of Quintillion Media with a 74% stake.

This unit clocked revenue of Rs 12.3 crore a net loss of Rs 65.7 crore for the year through March 2019. This means the unit is a bigger cash guzzler than the parent company itself, as its revenue is almost the same as that of the Quint but expenses are double. The cumulative investment in the unit is as much as Rs 154 crore, mostly in the form of debt, regulatory filings show.

*This article has been updated with additional background information.