Bennett Coleman To Up Stake In Videocon & Real Estate Co MVL

Bennett Coleman & Company Ltd (BCCL) is hiking its stake in consumer durable and energy firm Videocon Industries. The additional stake buy is valued at Rs 200 crore. The media firm which strikes ad-for-equity deals with small and mid sized firms is picking 1.17 crore warrants at a price of Rs 170 per unit (82% premium to the last trading price of Videocon).
The warrants (convertible within 18 months), when converted into equity will hike BCCL’s stake in Videocon from 1% currently to 5.7%.
BCCL had originally picked this 1% odd stake in late 2005 for around Rs 100 crore. With the warrants issue it would have invested(or rather posted Videocon ads on its media publications and channels) around Rs 300 crore at an average acquisition cost of Rs 214/share.
The latest deal can be seen as an averaging strategy for BCCL which had initially invested at a price of Rs 430/share three and half years back. Incidentally Rs 431 is the one year high price of the scrip which is now trading at Rs 93, a value erosion of around 80% for BCCL on its initial transaction.
MORE AVERAGING?
BCCL is also likely to be pick additional stake in realty firm MVL (which was demerged from consumer electronics firm Media Video and got listed last year). MVL board is meeting next week to consider the proposal to issue optional zero coupon convertible warrants/ zero coupon fully convertible unsecured debentures on preferential basis to BCCL and to Dainik Bhaskar Group.
BCCL already holds 3.35% in MVL which is a north India focused real estate developer. This stake is valued at Rs 11 crore nearly half of what it was in June 2008.
AD-FOR-EQUITY STRATEGY A MIXED BAG!
BCCL which has been very aggressive in striking deals through its private treaties unit over the last 5-6 years has burnt its fingers when markets crashed (in January 2008) before its ad-for-equity investments in various companies matured and the company could encash on it. The media giant which was also banking on pre IPO transactions is also facing exit problem in companies which were lined up for IPOs but couldn’t takeoff due to the state of the markets.
Last December, BCCL made a partial exit from jewellery maker Rajesh Exports after taking 20% haircut. In 2007 it had exited its investment in Deccan Aviation (now Kingfisher Airlines) when UB Group acquired stake in the low cost airline.
As against Deccan Aviation where it had exited at a profit after completion of one year lock-in period for its pre IPO transaction, BCCL made a loss in case of Rajesh Exports. At one time however BCCL was sitting on almost 7x profits in Rajesh Exports when the bull run was at its peak but it couldn’t cash out as it had a three year lock-in in case of the jewellery firm.
BUT COULD HAVE POCKETED AROUND RS 300 CRORE FROM HDFC BANK LAST QUARTER
In the previous quarter, when markets crashed in October-November post Lehman Bros bankruptcy, BCCL also appears to have sold shares of one of its early portfolio companies HDFC Bank. The media firm which had picked stake in the second largest private lender nine years ago as a result of sale of Times Bank to HDFC Bank, held around 2% stake in HDFC Bank as of September 2008. It had been maintaining this holding for more than eight years.
Its holding came down by around 0.8% during the previous quarter to 1.26% as of December end. Given the average share price of HDFC Bank during the quarter, BCCL could have pocketed somewhere around Rs 300 crore out of the partial exit from the bank. This surely was a profitable deal as HDFC Bank’s share price has moved up close to four times over the last nine years. BCCL still holds 1.26% stake in HDFC Bank which is valued at Rs 555 crore($108 million) in the market.

Dhoots to buy Nahata's 36% in Datacom

A long-running tussle between the Dhoots of the Videocon Group and Mahendra Nahata of Himachal Futuristic Communications over their telecom joint venture Datacom is nearing an end, with Mr Nahata agreeing to sell his 36% stake to the Dhoots for around Rs 1,200-1,300 crore, two persons familiar with the negotiations told ET. A settlement will allow the Dhoot family, which owns the remaining 64% stake in the company, to bring in a strategic partner to bankroll the company’s pan-India rollout plans, said the two persons, asking not to be named, as they were not authorised to speak about it.

Datacom, which has licences to offer services in all telecom circles except Punjab, has engaged Morgan Stanley to find a strategic partner. The company was one of the nine firms to get telecom licences early last year. The deal will also involve HFCL Infotel’s telecom operations in Punjab being merged with Datacom. But Mr Nahata will not get any additional cash consideration for HFCL Infotel, as its over Rs 400-crore debt will be transferred on to the books of Datacom. The figure could not be independently verified by ET.

When contacted, Mr Nahata and Videocon chairman Venugopal Dhoot denied they had reached an agreement. “It’s status quo. There is no agreement and no negotiations between us. We will soon launch pan-India services. We have no knowledge of HFCL Infotel, nor did we have any discussion with anybody as regards that business. There is no new development,” Mr Dhoot said, in reply to a detailed query. Mr Nahata also said the “situation continues to be as it was” and added he was not exiting the company. However, one person familiar with the negotiations insisted a deal had been reached and would be announced soon.

The second person also confirmed that an announcement was imminent and the deal value would be pitched around $250-270 million. One of India’s top law firms is drafting the settlement between the two partners. The negotiations between Mr Nahata and the Dhoots have been deadlocked for a year now, with Mr Nahata demanding Rs 2,116 crore for his stake. Last year, he had rejected an offer by the Dhoots to buy him out for Rs 1,360 crore.

Warring brothers put Onida on block

Two members of the Onida founding family have broken off with the third main shareholder and begun talks with a rival group led by Videocon and Kishore Biyani’s Future Capital to sell a substantial stake in the main holding company.

In a development fraught with enormous implications for the consumer durables industry and for one of India’s best-loved TV brands, Sonu Mirchandani and Vijay Mansukhani, who together hold 66% in Guviso, the holding company for Mirc Electronics, have put their stake on the block. Sharp differences with Gulu Mirchandani, Sonu’s brother and the chairman and managing director of Onida, are said to be the main reason.

Gulu, who holds the remaining shares, has been the public face of the company. Sonu and Vijay Mansukhani, the co-brother (Vijay and Gulu’s wives are sisters), have stayed in the background till now, but now want a change in their position. Vijay is on the board of Mirc Electronics, but Sonu is not. Sonu Mirchandani runs Monica Electronics, which manufactures a range of white goods including CTVs. Under an arrangement with Monica, Mirc markets these products under the Onida brand.

The two partners are also believed to be upset about Gulu’s control over the company. They feel that they should also have equal share and deciding power. The holding company’s name, Guviso, has been formed by the first two letters of the three individuals.

The development is significant for the consumer durables industry, which has often been plagued by low margins, heavy promotional costs and stiff competition. But Onida has always managed to keep its head above water. It is the third-largest colour TV brand with an estimated market share of about 10%.

It is one of the few Indian brands to have survived the onslaught of the aggression displayed by multinationals, especially the Korean companies in a fiercely-competitive durables market. The brand enjoyed an iconic status with its famous ‘Neighbour’s Envy, Owner’s Pride’ tag line. It is expected to fetch a valuation of Rs 600-800 crore, though its market cap is just about Rs 320 crore

(Source: Economic Times