Media giant News Corp has sold its entire 17.3 per cent stake in cable operator Hathway Cable & Datacom Ltd to two financial investors for Rs 358 crore or around $72 million, according to the stock exchange filings.
Private-equity firm Providence Equity Advisors Mauritius Ltd and Macquarie Bank Ltd, a unit of Australia's Macquarie Group Ltd, have acquired Star India's 24.72 million shares held via a Mauritius-based arm of News Corp, Asian Cable Systems Pvt. Ltd. for Rs 145 a share.
This is a discount of about 18.5 per cent to Hathway's closing share price of Rs 177.90 on Friday on the National Stock Exchange. Shares in Hathway on the NSE gained 0.4 per cent to Rs 178.60 Monday, while the benchmark Nifty rose 0.5 per cent. Hathway is the second largest cable operator by revenues and the largest in terms of market cap.
The deal would give Providence 9.9 per cent stake in Hathway for Rs 205 crore, while the remaining 7.4 per cent was acquired by Macquarie for Rs 153 crore. Providence bought over 14.14 million shares and Macquarie 10.55 million share on NSE. This would also make Providence the largest shareholder after the promoter group led by Rajan Raheja, which controls over 49 per cent stake in the public listed firm.
Other current investors in the cable operator include KAUP Capital's Infrastructure India Holding Fund, which holds 3.9 per cent besides Norway's sovereign wealth fund Government Pension Fund Global and a few mutual funds.
Earlier investors of Hathway included ChrysCapital and Morgan Stanley Principal Investments, which have exited the firm already.
ChrysCapital, which held a 13.3 per cent stake before the IPO in 2010, exited the firm during same year with modest 26-27 per cent gain. Morgan Stanley, which picked up the shares at an average cost of Rs 213 a piece in 2008, has seen significant haircut. It exited the investment during October-December quarter, when the shares were trading between Rs 80.5 to Rs 124.
This is the second media deal for Providence in India in less than one year. It invested around $58 million in UFO Moviez in April 2011. Its other investments include Idea Cellular and Aditya Birla Telecom.
In another recent development in the industry, the country’s largest cable operator by turnover Den Networks attracted interest from Reliance Industries, which picked a small stake in the company. Den Networks is backed by IL&FS Private Equity among other investors.
Hathway reported a 20 per cent increase in standalone net sales in FY11 to Rs 466.7 crore with its losses halving to Rs 40.31 crore as compared to FY10. For Q2FY12, it reported a 4.9 per cent increase in revenues to Rs 128.5 crore with loss of Rs 10.32 crore.
According to a PINC Research on the Indian Cable and Satellite industry (C&S), digital subscriber base in India is expected to rise to 83 million by 2015 from 47 million at present. India is expected to move compulsory digitisation by 2014 from currently dominant analog mode.
Hathway, the MSO with largest paying subscriber base of 1.8 million, will be the major beneficiary from this move due to its "business strategy, strong execution capabilities and market leadership in the metros would enable the company to monetise the digitisation opportunity," added the PINC report.
First round of digitisation is expected by June 2012 in four metros - Delhi, Mumbai, Kolkata & Chennai - where Hathway has leadership position. It can also now cross-sell services like broadband, a higher gross profit margin business.
