'We are entering into an era where capital will be scarce' : Citi Venture Capital International managing director India region head PR Srinivasan

There may be pressure on Citigroup Inc. to remove the flab with the US government agreeing to infuse $20 billion of capital as part of a rescue package, but Citi Venture Capital International (CVCI) is drawing up plans to make acquisitions at attractive valuations. Out of the $4.5 billion fund, it is yet to invest $3 billion, almost a third of which will pour into the Indian market.

Though CVCI has made only one media investment in You Telecom, a broadband and cable TV company, it is also eyeing the direct-to home (DTH) and Hindi entertainment broadcasting space.

In an interview with Sibabrata Das, Citi Venture Capital International managing director India region head PR Srinivasan talks about the opportunities of investing in various sectors including media at a time when capital is going to be scarce.


Being in the midst of an unprecedented global economic turmoil, how comfortable is Citi Venture Capital International (CVCI) in its funding structure to grab buying opportunities in Indian media companies?

We have a $4.5 billion fund, out of which $3 billion is yet to be invested. We have already invested $500 million in India. We are likely to pump in a further $750 million-$1 billion in this market while the balance will be put in China, Eastern Europe, etc. You Telecom has been our only investment in the media and entertainment sector. But as asset prices come down, we are open to picking up stakes in other verticals within the media sector.

Have you initiated talks with any of the media companies?

We see a good investment opportunity in DTH and are talking to one player. We may also start looking at TV channels in the Hindi general entertainment space, if they come at attractive valuations and are managed well. Even if we are headed for a slowdown, the truth is that people will still want entertainment. Since we have already acquired You Telecom, we are not looking at parallel investments in the cable TV sector. We would expand and make further acquisitions through You Telecom.

Since CVCI has a running investment in a broadband and cable TV company through You Telecom, why is it that you are eyeing a competing distribution platform like DTH?

There is space for all three forms of carriage - DTH, cable TV and IPTV. No form of distribution is superior or dominates over the other. In the US, both cable and DTH enjoy substantial market shares. The only country which has a single dominant platform is UK where DTH has a content advantage in form of exclusive sports telecast rights. India, however, has a content-neutral policy. The regulatory framework is also in favour of independent distributors and is neutral to broadcasters. The DTH sector also has a 20 per cent equity cap for broadcasting companies.

The main cost in DTH is advertising. Unlike cable which has a capex requirement in the distribution architecture, DTH doesn't have a wired cost. If you get scale in DTH, you will become profitable. The expense mix will change with volumes. But in India with so many players getting into the business, not all will get the scale.

When CVCI bought out British Gas's broadband business, was the investment attractive because the infrastructure of You Telecom could be used for cable TV service?

You Telecom had world class network built to FCC standards. We were clear that we would buy this asset and wait for both competition and regulation to fall in place so that this can be developed into a last mile home entertainment network. When the government came out with Cas and DTH became active, digitalisation got a push. For the cable TV business to grow, there was need for competition, the right market, and the right regulation. We are in that environment today. India is in the early stages of having second TV - so we could have a situation where we have both cable and DTH.

Were you not in discomfort because the cable TV sector has too many players and there is very little of last mile ownership with the multi-system operators (MSOs)?

In terms of reaching homes, cable with 80 million does much better than telecom. The sector needs to get more organised; it is only a matter of time before this happens. The cable industry in India is a marathon and not a sprint. Though there is a capex requirement and last mile is still not under control of the MSOs, the mix looks good once you have a base of one million digital subscribers.

'For the cable TV biz to grow, there was need for competition, the right market, and the right regulation. India is in the early stages of having second TV - so we could have a situation where we have both cable and DTH'

Why did You Telecom take so long in moving into cable TV service?

Our efforts to do the video business evolved with the DTH industry. We acquired a 50 per cent stake in Bangalore-based Digital Infotainment, a small-sized cable network, to make our foray into the cable TV business. We also took a majority in Scod18 Networking, an association of cable TV distributors in Mumbai. We have cable TV operations in Mumbai, Bangalore, Vizag and Dharwad in Maharashtra.

In You Telecom, CVCI has 85 per cent stake. How did you restructure the equity structure as the government allows only 49 per cent FDI (foreign direct investment) in a cable TV company?

We floated Digital Outsourcing, the company that would handle cable TV business. Tulsi R Tanti and his family members, promoters of Suzlon Energy Ltd, have acquired 49 per cent stake in this company. You Telecom India owns 36 per cent while the rest is held by high net worth Indian individuals.

How much is You Telecom investing to expand its business?

You Telecom plans to pump in Rs 4 billion over the next two years to expand its cable TV and broadband business. If we decide to go for Headend-In-The-Sky (HITS), we will require another Rs 1.5 billion. We have 1.3 million cable TV subscribers and expect this to go up to three million. We have seeded 60,000 digital set-top boxes and expect to touch one million in the next 18 months. The cable business will grow through setting up own headends, acquiring networks and forming joint venture partners in different geographies. There is a lot of entrepreneurial talent in the cable community and we want to tap into that.

Do you have an aggressive plan in acquiring last mile operators?

The challenge in cable is to get direct points. We bought 5000-7000 points. Our strategy is to own last mile, but all in good time. Our plan is to own a headend and then acquire the last mile. The valuations for last mile were inflated because people thought there was abundant capital available.

Have the valuations dropped drastically?

For the last three years, there has been abundant capital and liquidity. Though we purchased at 18-24 months revenue, there were MSOs who bought at 30-40 months turnover. That kind of money is not available; we will not get financing for making purchases like that any more.

Most of the mid caps have fallen over 80 per cent. The last mile business has to follow along those lines. People are not going to bid prices up. It is only a matter of time before people accept the new world realities. We are entering into an era where capital will be scarce. Business plans will have to evolve accordingly.

Do you see yourself in an advantageous position because you are sitting on cash at a time when the credit markets are frozen and capital is hard to get?

Money is not going to be available on tap. This will impact the way the new financial system is going to be reshaped. Every sector will feel the jolt. As new broadcasters need to raise capital, MSOs who have planned carriage revenues over the next 2-3 years to support their business models will find the going very hard. Many of them will have to redraw their plans.

It is a good time to have cash. For those who are investing now, the returns will be higher than the previous years.

Latest Reads
Republic TV, BTVI join hands for budget coverage

MUMBAI: Republic TV, spearheaded by Arnab Goswami, and Business Television India (BTVI) have entered into an alliance for content and programming around Union Budget 2018. The Republic TV- BTVI alliance promises to offer viewers a distinctive experience.

Television TV Channels News Broadcasting
Mairu Gupta and the art of building the NBA in India

MUMBAI: For basketball fans worldwide, the US National Basketball Association (NBA) represents the mecca of the sport. But in India, the NBA has had its task cut out, what with cricket presenting a near impenetrable line of defence.

Television TV Channels Sports
CNN-News18 'Indian of the year' 2017 special Telecast on 9 and 10 December

MUMBAI: The awards night of the annual and flagship initiative of CNN-News18, ‘Indian of the Year – 2017’ will be telecasted on the 9 and 10 of December at 9:30 PM on the channel. The initiative, whichrecognizes and awards the exceptional contribution and achievements of the iconic Indian citizens...

Television TV Channels News Broadcasting
Music channels bet on shows to boost viewership

MUMBAI: Seems like music channels are playing second fiddle to online music platforms when it comes to playing tracks. In an attempt to grab more eyeballs, pure-play music channels on television are moving away from the music content and focusing more on the youth-centric shows.

Television TV Channels Music and Youth
Zee TV leads Hindi GECs in week 48 of Barc ratings

MUMBAI: Zee TV emerged as the leader among Hindi general entertainment channels (urban + rural) dethroning Zee Anmol, according to Broadcast Audience Research Council’s (BARC) all-India data for week 48.

Television TV Channels GECs
Republic TV continues lead as genre ratings rise

BENGALURU:Two of weeks earlier, we had mentioned that the English News genre’s four week average ratings and weekly ratings have been falling since weeks 29 to 32 of 2017. The fall continued until week 47 of 2017 when the combined Broadcast Audience Research Council of India (BARC) weekly ratings...

Television TV Channels News Broadcasting
SPN India acquires TV, OTT rights for T10 Cricket League

MUMBAI: The newly introduced T10 Cricket league (TCL), which will be played at the UAE’s Sharjah Cricket Stadium, will be telecast live on Sony ESPN. The league is a four-day event running from the 14th to the 17th of December 2017.

Television TV Channels Sports
News Corp’s new ad network takes on Facebook, Google

Training its guns at the digital-ad dominance of Google and Facebook, News Corp has launched a platform, News IQ, to let advertisers reach audiences across all of its online properties.

Television TV Channels News Broadcasting
Gracenote launches channel monitoring solution for broadcasters

MUMBAI: Gracenote, a Nielsen company, has launched its next-generation TV distribution monitoring and reporting solution developed specifically for the Indian TV market called TV Street Maps 2.0.

Television TV Channels People

Latest News

Load More

Sign up for our Newsletter

subscribe for latest stories