Anil Ambani’s BIG FM is music to the ears of Radio City; key benefits for Music Broadcast from deal

After Anil Ambani led Reliance Broadcast Network’s deal with Music Broadcast to sell BIG FM radio channel, analysts say that the deal is attractively valued for the Jagran Prakashan group firm.

Written by FE News Desk

May 30, 2019 12:18 IST

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For the Anil Ambani-run Reliance Home Finance, where the agency has an outstanding rating on a Rs 1,200 crore commercial paper program, the rating has been downgraded to junk grade of D from A4 with rating watch on negative implications.

After Anil Ambani led Reliance Broadcast Network’s deal with Music Broadcast to sell BIG FM radio channel, analysts say that the deal is attractively valued for the Jagran Prakashan group firm. Notably, Reliance Broadcast Network is selling an initial 24% stake to Jagran Prakashan group’s Music Broadcast in an all cash deal for Rs 202 crore. Further, after receiving requisite regulatory approvals, further investment of Rs 348 crore will be made by Jagran Prakashan to pick up remaining promoter stake by the end of first quarter of FY21. The acquisition is being done at an enterprise value of Rs 1,050 crore. Taking stock of the overall deal, Motilal Oswal said in a note that the deal is at an attractive valuation for Music Broadcast. “Post regulatory approval, Music Broadcast will acquire the entire stake of RBNL’s promoters for an EV of Rs 1,050 crore, we estimate this to be at a compelling valuation of 8x EV/EBITDA for its radio business,” said the firm. Motial Oswal said that it needs to be ascertained if RBNL comes with any loss-making business.

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Sharing the strategic rationale for the deal, Music Broadcast said that, following the acquisition it will have combined 79 Stations largest in the country, expanding its FM footprint to 82 per cent. Notably Music Broadcast is acquiring 58 Pan-India Radio Stations of Reliance Broadcast; out of which 40 stations will be retained, and 18 stations may have to be surrendered by RBNL under law. The deal will also provide the firm with market leadership across all key markets in terms of listenership and advertising.

The radio firm said in a press release that since BIG FM’s offering is primarily in the Retro Music format, which targets the 45+ age group, there is no cannibalisation with Radio City as the genre is different there. Overall, the deal will help to create a very powerful offering for advertisers to command premium pricing; multiple frequencies would also be able to run successfully without cannibalising and Music Broadcast hopes to garner cost synergies that will help improve the EPS.

In case of the Anil Ambani-led firm, the transaction is being done with the intention of cutting the group’s overall debt. “Together with the stake sale in Reliance Nippon Asset Management for Rs 6,000 crore and other ongoing monetisation plans, we expect Reliance Capital’s debt to reduce by around Rs 12,000 crore (nearly 70%) in FY20,” Reliance Capital said in a press release.

This article was first uploaded on May thirty, twenty nineteen, at eighteen minutes past twelve in the night.