7/14/2016

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Proposing49%FDIinprint:toolittle,toolate
Goingbytheverdictofexpertsinthemediasector,Indiamaycontinuetobestarvedforforeigninvestmentsinnewspapersevenif
thegovernmentfinallyclearstheproposalallowing49%FDIinthesegment
Itmaybeabitofastretchbutthereareonlytwopeoplegloballywith
themoneyandtheinclinationtoinvestinprintmediaatthemoment.
RupertMurdoch,executivechairmanofNewsCorp.,andJeffBezos,
founderandchiefexecutiveofAmazon.comInc.Mediamagnate
MurdochownsseveralnewspapersintheUS,AustraliaandtheUK
(TheWallStreetJournal,TheSundayTimesandTheSun,tonamea
few)inadditiontofilmstudiosandtelevisionbroadcasting
businesses.BezospurchasedTheWashingtonPostfor$250million
inOctober2013.(ThenewspaperwasownedbytheGrahamfamily).

Thehintofopeningupprintmediatoforeigninvestorsfirst
cameinJanuary2015fromArunJaitley,when,asthe
informationandbroadcastingminister,hesaidthatthe
debateonpermissiblelimitsonFDIinnewsmediahasbeen
renderedirrelevantbytechnology.

Goingbytheverdictofexpertsinthemediasector,Indiamay
continuetobestarvedforforeigninvestmentsinnewspapersevenif
thegovernmentfinallyclearstheproposalallowing49%foreign
directinvestment(FDI)inthesegment.Lastweek,Bloomberg
reportedthefinanceministrysviewonraisingtheforeigninvestment
caponIndiasprintmediafromthepresent26%to49%,bringingit
onaparwithnormsfortelevisionnewssegment.ThelimitforTV
newswasraisedto49%inNovember2015.Thereportfurtherstated
thatthedepartmentofindustrialpolicyandpromotionunderthe
commerceandindustryministrywilltakethefinalcallonthematter.

Tobesure,thegovernmenthasalreadyliberalizedtherestofthe
mediasectorandpermitted100%FDIthroughtheautomaticrouteintelevisionbroadcastcarriageserviceslikedirecttohomefirms,cable
TVnetworksandheadendintheskyplatforms.ThechangeswerenotifiedinJune.
ThehintofopeningupprintmediatoforeigninvestorsfirstcameinJanuary2015fromArunJaitley,when,astheinformationand
broadcastingminister,hesaidthatthedebateonpermissiblelimitsonFDIinnewsmediahasbeenrenderedirrelevantbytechnology.All
foreignnewspapersareaccessibleovertheInternet,henoted,speakingattheJusticeJ.S.VermaMemorialLectureorganizedbytheNews
BroadcastersAssociation.
AlthoughafterlastweeksBloombergreport,sharesofprintmediacompanieslikeJagranPrakashanLtd(publisherofHindidailyDainik
Jagran)andHTMediaLtd(publisherofHindustanTimesandMint)rose,expertsdonotseethistranslatingintoabrighterfutureforthe
sector.WhileitistruethatIndiasprintmediasectorcontinuestogrowevenasothermarketsarereportinganegativetrend,thisgrowthis
expectedtodeclineovertheyears.AccordingtonumbersfromtheFicciKPMG2016reportonthemediaandentertainmentsector,print
mediainIndiagrewat7.6%in2015over2014intermsoftheoverallindustrysize.Itscompoundannualgrowthrate(CAGR)isestimatedat
7.8%between2015and2020.ItsCAGRforadvertisingrevenueduringthesameperiodisprojectedat8.6%.
Scepticsarguethatintheabsenceofpermissionformajorityownershipinthepolicythatisbeingdiscussed,theinterestfromstrategic
investorsmaybemuted.However,financialinvestorsmayevincesomedegreeofinterest.Overtheyears,evenatthe26%FDIlimit,some
newspapersmanagedtoattractinvestors:privateequity(PE)firmWarburgPincusLlcinvestedinDBCorpLtd,publisherofDainikBhaskar.
HendersonEquityPartnersLtdinvestedinHTMedia.JagranPrakashanfoundastrategicinvestorinIndependentNewsandMediaPlcthat
boughta26%stakeinthecompany.Mostoftheseinvestorshavenowexitedthesecompanies.
FinancialinvestorsmayseesomemeritininvestinginIndianprintmediacompaniesbecausesomeofthemhavehugecashflows.Andyou
candoalotwithit,saysJehilThakkar,head(mediaandentertainment)atconsultingfirmKPMG.
PEfirmscanaddvaluetothenewspaperbusinessesincasetheyhaveoperationalorotherissues.Earlier,atacapof26%,theycouldexert
noinfluenceonthepublisher.At49%,theywillhaveatleastsomelevelofinfluence.Andunlikeastrategicinvestor,theymaynotbereally
beinterestedinacontrollingstake.
BothPEfirmsandstrategicinvestorsmayalsofinditworththeirwhiletoinvestinregionalprintmedia,whichisgrowingatafasterratethan
Englishprintmedia.
ButIdontseeahugewaveofinvestment,saysThakkar.Infact,PEfirmswillhavetoworryabouttheirexitsastheprintindustryis
expectedtogrowonlyforanotherseveneightyears.
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7/14/2016

Proposing49%FDIinprint:toolittle,toolatePrintViewLivemint

Intermsofgrowthrates,theIndiastoryinprintmaystillholdpromisebutthegrowthratesareslowing.Underthecircumstances,thereare
muchbetteroptionsavailableforinvestorsinthenewmediaspace.Digitalandradioarestillgrowinginhealthy
doubledigits.In2015(over2014),advertisinginprintmediagrewat7.3%,comparedto15.3%inradioand38.2%indigitalmedia.Their
growthrateprojectionsforadvertisingbetween2015and2020areattractivetoo:16.9%forradioand33.5%fordigitalmedia.(Ofcourse,
profitablebusinessmodelsindigitalremainelusive).
Ifthegovernmentdoeseventuallyopenupthesectorfurtherforforeigninvestors,dontexpectasurfeitofdealsimmediately.Theofferistoo
littleandtoolate.
ShuchiBansalisMintsmedia,marketingandadvertisingeditor.OrdinaryPostwilllookatpressingissuesrelatedtoallthree.Orjustfun
stuff.

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