The most intriguing part of the plan to invest in Viacom18 was the restructuring of the joint venture between James Murdoch, the inventor of Lupa Systems, and Uday Shankar, the former chairman of Star and Disney India. This joint venture is called Bodhi Tree Systems.
A brief about The recent deal between Bodhi Tree and Viacom18 indicates Reliance’s aggressive drive into the broadcasting business
The initial deal called for Bodhi Tree Systems, an investment vehicle supported by the sovereign wealth fund of Qatar, to purchase a 40% interest in Viacom18 for Rs 13,500 crore. In addition to this, Reliance was expected to contribute an additional Rs 1,645 crore through a group organisation, bringing the total amount invested in Viacom18 to Rs 15,145 crore.
This original transaction, which was announced in April, was supposed to close in six months. Reliance was scheduled to own around half of the remaining shares (or the remaining 60%), and Paramount Global (formerly known as ViacomCBS) was supposed to control about 10% of the remaining shares.
The fact that information was made public before to the Indian Premier League (IPL) rights auction is crucial. Jio purchased the digital rights to this prestigious competition in mid-June of last year. The cost was Rs 23,758 crore over a five-year period, with Disney Star paying Rs 23,575 crore for the television rights.
After the first agreement between Bodhi Tree and Viacom18 was made public, it has now been revised. Reliance will now contribute Rs 10,839 crore, while Bodhi Tree’s contribution has been reduced and is now estimated at Rs 4,306 crore, meaning that the overall amount of capital infusion will stay the same at Rs 15,145 crore. On a fully diluted basis, Reliance will hold 60.37 percent of the shares, TV18 will hold another 13.54 percent, Bodhi Tree’s interest will be down to 13.08 percent from the previous 40 percent, and Paramount would keep the remaining 13.01 percent.
Bodhi Tree may have had numerous reasons for reducing its investment, but the most obvious one seems to be the global cooling of IT values. Bankers, however, disagree. Jio has developed steadily in the Indian OTT arena, especially with the acquisition of IPL rights, according to Utkarsh Sinha, MD of Bexley Advisors, a boutique investment bank focused on the digital and media sectors in India. Their free-acquisition strategy has historically been very successful with 4G, and IPL is probably going to be a key component of their acquisition strategy for 5G as well. It’s likely that they deemed the previous dilution levels to be too expensive given their current predictions if they anticipate comparable success in that play, the analyst said.
Regarding the specific concern of valuations in the industry declining, Sinha acknowledges that it is impossible to refute that idea. “Jio is arguably one of the few players who has its own substantial finances to a significant extent immunise it against this slump. Therefore, it is necessary to consider other situations, he said.
The managing partner of NV Capital, a media and entertainment (M&E) credit fund, Vivek Menon, believes Reliance has changed its strategy in order to keep a larger share of the total Viacom18 company.
“Clearly, they see a big potential,” he said, citing Jio Cinema’s recent statement that a slate of 100 films and web series would be released over the course of the following 18 to 24 months. Menon claims that Jio Cinema intends to step up its game and “provide the necessary fuel to be in the driver’s seat for Viacom18” with this ambitious agenda in the content arena. In the past, the tactic of bringing in investors while holding onto its controlling position has worked in the telecoms and retail industries.
Most recently, Comcast paid $200 million (Rs 1,600 crore) for a share in Bodhi Tree. Along with Disney, Discovery, and Warner, Comcast is one of the biggest entertainment businesses in the US. Comcast’s action is highly intriguing given the way events are developing in India, Menon said. Jio’s capacity for endurance appears to be the key element. Few businesses can execute a long-term and sustained client acquisition drive without external financing, but they have the big funds necessary to do it, according to Sinha.