Network18 Group

Q&A
Raghav Bahl (Group Chairman)
Haresh Chawla (Group CEO)
Sameer Manchanda (Jt. MD, IBN18)

December 2008

Nikhil Vora / Bhushan Gajaria

(M) +91 –9821132471 / 9821987091
(Dir) +91-22-6638 3308 / 3367
nikhilvora@idfcsski.com /
bhushangajaria@idfcsski.com
A Q&A session with the Management…

Qs?
1. Group holding structure and intergroup ownership
2. Capital infused in each of the businesses by the holding company
3. TV18
1. Operational update
2. Balance sheet status & funding requirement
3. Segmental financial snapshot

4. IBN18
1. Operational update – core news operations; Colors & other Viacom18 properties
2. Viacom18 funding requirement
3. IBN18 balance sheet & funding requirement
4. Segmental financial snapshot

5. HomeShop18
6. Queries on other group ventures and investment arms

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1. Group holding structure…
Raghav Bahl / Other promoters

1.7% 51.8% 3.0%

Network18 Network18
India Holdings Holdings
49.3% 29.3% 66.0% 65.0% 18.0%

21.2%
TV18 IBN18 SetPro HomeShop18 IFC

100%
TV18 + Awaaz 100.0%
13.5% CNN IBN/ IBN7
86.5%
Colors
Web18 50.0% MTV
Viacom18 Vh1
70.0% Nickelodeon
Newswire18 50.0%
Studio18
IBN Lokmat
44.0%
Infomedia

Forbes

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1. Group holding structure…

Holding (%) Network18 TV18 IBN18 (post IBN7 Merger)

Raghav Bahl 50.6 1.5

Network18 49.3 29.3

TV18 21.2

IBN18

Other Promoter group/ Management 1.2 0.2

Total promoter holding (%) 51.8 51.0 50.5

Domestic Others 36.0 30.8 33.2

Foreign Investors 12.2 18.2 8.4

Gupta Family (Jagran) 4.0

Treasury Stock 4.9

Total Number of Shares (m) 61.8 119.9 181.7

Face Value (Rs) 5.0 5.0 2.0

Total Equity Capital (m shares) 309 599 363.4

IBN18 equity capital is post merger of IBN7, QIP and warrant issuance to TV18

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1. Group holding structure

‰ TV18 owns 21.2% in IBN18 post the issuance of 15m warrants

convertible at Rs102 per share (done recently)

‰ IBN18 includes 16.3m shares to be issued on merger of IBN7. Around

9m shares (equivalent to IBN18’s existing 55% stake in IBN7) to remain
as treasury stock

‰ TV18 bought 40% in Infomedia from ICICI Ventures + 3.65% acquired

through open offer; also has 5m warrants in Infomedia (likely to lapse)

‰ 13% stake in Web18 owned by Tracer Capital & couple of other

investors - bought over by TV18 at Rs1.6bn; too steep a price for a
reported investment of less than Rs0.5bn!

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2. Capital employed by holding companies
Initial capital Fund infusion
Companies % holding Remarks
(Rs m) (Rs m)
Companies under
Network18
TV18 49.3 Scheme of demerger 1,990 Conversion of 5m warrants at Rs398/ share

Conversion of 5.5m warrants out of the total

IBN18 29.3 197 1,142
15m warrants at Rs177.6
Remaining stake with Sameer Manchanda
SetPro 66 50
and Raghav Bahl
IFC 18 807 Listed at AIM
SAIF Partners controls the remaining
HomeShop18 65
through a convert structure
Network18 India
100 1,696 Investment arm
Holdings
Companies under
TV18
Web18 86.5 Scheme of demerger 750 Remaining 13.5% with IBN 18

Newswire18 70 55 80 Acquired from CRISIL Market Wire

Infomedia18 44 1780 200 Acquisition + Open Offer

IBN18 21.2 Scheme of demerger 1,530 15m warrants issued @Rs102 per share

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3.1. TV18 – Operational update

‰ Core news broadcasting operations

ƒ Near-term growth under pressure given the ongoing capital market turmoil;
slowdown in IPO/ NFO and BFSI advertising
ƒ Likely decline in revenues in Q4FY09 as Parliament elections due in April/ May;
therefore, Union Budget only in Q2FY10
ƒ News business growth at ~8%; margins at ~35% in FY09E
ƒ Key monitorable - Business news channel by ET, likely launch in Q1CY09
ƒ Potential to generate Rs1bn+ pay revenues; but a long-term growth propeller

‰ Web18
ƒ ~70% of revenues from moneycontrol.com (in the financials vertical) at risk
ƒ in.com – the recently launched horizontal portal – to be the driver property; notably,
Rediff.com, India’s largest horizontal portal, has revenues of less than USD30m
ƒ All the launch expenses on in.com charged off through P&L
ƒ Expect revenue growth of ~35% in FY09; Losses similar to that in FY08

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3.1. TV18 – operational update

‰ Infomedia18
ƒ Acquired a 44% stake in Infomedia for Rs2.2bn
ƒ Key growth driver – business directory; Leverage Yellow Pages on internet
(yellowpages.in) and voice (recently acquired Ask Me services)
ƒ Leverage business magazines like Overdrive on TV and internet
ƒ Plans to hive off printing facilities and outsourcing business
ƒ Revenues likely to decline in FY09; we see losses even at operating level
ƒ Unlikely to exercise warrant conversion as conversion price at 3x the CMP; 51%
stake not mandatory (TV18 has management control with a 44% stake)

‰ Print Media
ƒ Launch of business news magazine with Forbes by March’09; total investment of
Rs250m
ƒ Launch of pink paper delayed – vernacular newspaper with Jagran Prakashan and
English newspaper with an international brand
ƒ Open to entry through the acquisition route

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3.2. TV18 - Funding growth
‰ Funding requirement
ƒ Rs1.5bn to increase stake in IBN18
ƒ Rs600m of cash loss in Web18,
Newswire18 and Infomedia
ƒ Rs1.2bn for conversion of warrants
in Infomedia (unlikely to convert)
ƒ Rs250m on Forbes magazine
ƒ Rs1bn of working capital funding
ƒ Rs400m towards strategic media
investments
Total minimum capital requirement
of Rs4bn
‰ Current balance sheet
ƒ Current debt - Rs9bn (Rs6.5bn long-term)
ƒ Current cash on books of Rs4.5bn
ƒ Gearing of 1.2
‰ Funding and deleveraging options
ƒ Cash profit of Rs1bn from news
operations
ƒ Rs2.75bn to be received from IBN18 as
IBN18 exercises its option of acquiring
50% stake in Viacom18
ƒ Release funds in Infomedia by sale of
printing press and outsourcing operations
ƒ Plans to list/ Strategic stake sale of
Web18
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3.3. Financial performance

Company FY08 FY09E

(Rs m)
Revenues EBITDA Net Profit/ loss Revenues EBITDA Net Profit/ loss

TV18 - news operations 3,323 1372 870 3,582 1,260 653

Web18 545 (318) (387) 741 (299) (408)

Newswire18 116 (98) (71) 243 (63) (79)

Infomedia18 1,862.2 95.7 (52) 1,450 (218) (141)

TV18 Consolidated 3,987 957 388 6,015 681 25

Infomedia18 transaction completed in FY09; hence not included in FY08 numbers

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4.1. IBN18 – Operational update

‰ CNN IBN
ƒ Closely fought battle with Times Now and NDTV 24x7 in English news genre
ƒ Rs1.3bn of revenues growing at 20%yoy and profitable; share of pay revenues still
insignificant
‰ IBN7
ƒ IBN18 owns 55% stake in IBN7 (45% with Jagran Group promoters); IBN7 to be
merged into IBN18
ƒ A laggard with ~10% market share in the cluttered Hindi news genre
ƒ Revenues of Rs533m and losses of Rs267m in FY08; expected to grow at 35% and
nearing breakeven
‰ IBN Lokmat
ƒ Marathi news channel - a 50:50 JV with Lokmat, leading Marathi print play
ƒ Operating cost structure of Rs200m-220m; revenues beginning to flow in
ƒ Likely to incur Rs80m-100m of losses in FY09
ƒ Plans to add a few more regional news properties

~Rs400m being spent on carriage fees

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4.1. IBN18 – Operational update

‰ Colors – A strong No.2 in GEC, headed towards leadership

ƒ A clear number 2 player in the GEC space – 225+ GRPs; next only to Star
ƒ Reached number 2 slot within two months of launch - a first in the global broadcast
history
ƒ Occupies all the 5 top slots & 9 of the top 20 slots
ƒ Unlike broadly perceived, GRPs coming from daily shows – Balika Vadhu & Jai Shree
Krishna; Big Boss & Fear Factor just created visibility

Overall GRP Share Top Content Ratings

320
GRPs - Overall No of shows Top 20 Top 100

Star Plus 10 35
240
Zee 1 31
160
Colors 9 26
80 NDTV Imagine 4

0
Sony 3
Star Plus Colors Zee Sony Star One NDTV 9X Sahara SAB
Imagine One Star One 1

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4.1. IBN18 – Operational update

‰ Colors – Revenue curve to follow viewership gains

ƒ Ad rates beginning to track viewership share - rack rates moving closer to Star &
Zee; distribution revenues to flow in from year-2

ƒ Pre-booked inventory sales at just 20% - risk paid off well

ƒ Current run rate of Rs250m of ad revenues per month

ƒ Distribution revenues to flow in from FY09; in FY10, distribution revenues expected

to be 1/4th that of Zee despite 1.25x viewership that of Zee

ƒ High spending on launch marketing (~Rs750m) and carriage (~Rs1bn)

ƒ Content cost in line with peers

ƒ Expected breakeven in FY10

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4.1. IBN18 – Operational update

‰ Viacom18’s other properties – MTV, Nickelodeon & Vh1

ƒ Revenues exceeded Rs1bn in FY08 and EBITDA of Rs127m
ƒ MTV – the leading music channel; plans to reposition itself as youth-based general
entertainment channel
ƒ Nickelodeon is already number 2 kids entertainment channel (~20% market share)
ƒ Vh1 – the only international music channel
ƒ 25% CAGR in business operations over FY08-11E

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4.2. Funding of Viacom18

‰ Viacom brings in MTV, Vh1 and Nickelodeon @ pre money valuation of

USD90m
‰ Terms of infusion by IBN18
ƒ USD50.5m upfront payment (funded by TV18)
ƒ USD40m in 3 tranches of warrant conversion (15+15+10) over 3 years

‰ Incremental capital on call by both the parties – Rs600m infused so far,

incremental Rs1bn to be infused
‰ Currently Zero Debt company – estimated to raise up to USD25m-30m
of working capital funding
‰ Funding requirement – USD150m
ƒ USD 25m-30m on capex of Colors
ƒ USD 85m-90m of cash loss funding till Colors turns profitable
ƒ USD 25m-30m of working capital funds

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4.3. Funding of IBN18
‰ Funding requirement
ƒ Rs2.75bn to repay TV18 for
funding its share of Viacom18
ƒ Rs2bn (USD40m) to fund
warrants in Viacom18; USD15m
required upfront
ƒ Rs500m (USD10m) to fund
Viacom18 on incremental call
Total minimum fund requirement
– Rs5.25bn
‰ Mode of funding
ƒ Cash on books of Rs250m and
debt of Rs1bn
ƒ Rs1.14bn raised through current
QIP at Rs102 per share
ƒ Rs1.5bn raised through warrant
issuance (15m) to TV18
ƒ Incremental debt issuance of
Rs1bn with enhanced net worth
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4.4. IBN 18 – Financial performance

Company FY08 FY09E

(Rs m) Net Profit/

Revenues EBITDA Revenues EBITDA Net Profit/ Loss
Loss

CNN IBN 1,350.9 124.5 (68.7) 1,564.0 130.0

IBN7 550.7 (177.4) (267.2) 720.0 (20.0)

IBN Lokmat 30.0 (140.0)

Total news operations 1,901.6 (52.9) (335.9) 2,314.0 (30.0) (320.3)

Colors 1,458.0 (2,879.0) (3,189.0)

Viacom18 - others 1,027.0 127.0 (0.4) 1,663 141.4 12.3

Non-news operations 1,027.0 127.0 (0.4) 2,811.8 (2,730.1) (3,159.2)

IBN18 Consolidated 3,877 (1,399.6) (2,203.9)

Viacom18 transaction completed in FY09; hence not included in FY08 numbers

Viacom18, Colors & IBN Lokmat – Consolidated numbers account for only the 50% share held by
IBN18; Consolidated numbers also include additional debt of IBN18 to fund Viacom18

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5. HomeShop18 – Operational and Financial Update

‰ Network18’s effective holding in HomeShop18 to be at ~65% with the

remaining 35% with SAIF Partners (on a convert structure)
‰ Total investment of Rs1bn in HomeShop18
ƒ SAIF Partners invested Rs250m initially for a 25% stake
ƒ Network18 has invested Rs300m in HomeShop18
ƒ Incremental Rs450m invested by SAIF Partners in a convertible structure – conversion
value of Rs5bn
‰ Business update
ƒ Business operations panning TV and Web
ƒ Gross monthly revenues of ~Rs130m; Net commission revenues of Rs30m
ƒ Currently incurring losses of Rs25m-30m per month
ƒ Likely breakeven by FY10
‰ No more incremental funding required in the business

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6. Other Qs…

‰ What is the Balance Sheet status of Network18?

ƒ Debt of Rs2.5bn, cash on books of Rs500m. Net worth of Rs6bn
ƒ 9.5m pending warrants in IBN18 (@Rs177.6) and 5m pending warrants in TV18
(@Rs398) not likely to be converted – substantially out of money

‰ What is Media Venture Capital Fund (MVCF)?

ƒ Media Venture Capital Fund is private equity / VC Fund trust
ƒ TV18 has invested Rs600m in the fund so far
ƒ Focused on investments in digital business, education and new media
ƒ MVCF has so far invested in 6 assets including promoter-owned companies –
Toppers18 (education channel) and DEN (cable operations). Surprisingly, DEN has
been one of the investments made by MVCF. We were earlier given to
understand that DEN was TOTALLY funded by promoters of Network 18 group
and that NO investments came from the listed entities…

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6. Other Qs

‰ What is TV18 Media and Investments?

ƒ TV18 Media and Investments is a Mauritius-based 100% subsidiary of TV18 India
ƒ Total invested book ~ Rs1.6bn
ƒ Funds utilized to buy ~13% stake in Web18 held by Tracer Capital and a couple of
other investors
ƒ We believe that it is too steep a price paid – valuing Web18 at over Rs10bn
(Tracer has invested USD10m for 10% stake)

‰ Does TV18 intend to convert the 5m warrants of Infomedia?

ƒ Conversion price of Rs239 per share - 4x the CMP
ƒ TV18 has management control with its 44% stake and 51% stake not mandatory as
per regulations
ƒ We believe that TV18 would let the warrants lapse

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6. Other Qs

‰ How would the 9m treasury stocks to be held in IBN18 treated post

the merger of IBN7?
ƒ On merger of IBN7 (Jagran TV), IBN18 will issue 16.3m shares to IBN7 shareholders
ƒ IBN18 currently owns a 55% stake in IBN7
ƒ Instead of cancelling the shares, IBN18 would keep 9m shares (equivalent to 55%
stake) as treasury stock
ƒ Treasury stock could be used later be used to raise funds in IBN18 and deleverage
the balance sheet – worth Rs900m at current price
ƒ The stock not treated as Person Acting in Concert (PAC), but will cast the vote
along with the management for any resolution for limited time-period

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 Thank you

Nikhil Vora / Bhushan Gajaria / Swati Nangalia

(M) +91 –98211 32471 / 98219 87091
(Dir) +91-22-6638 3308 / 3367 / 3260
nikhilvora@idfcsski.com / bhushangajaria@idfcsski.com / swati@idfcsski.com

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