Reliance Industries Ltd is investing R1500Cr in the promoter group of Network18 Group to fund the rights issues of its two listed entities, Network18 Media and Investments and TV18 Broadcast Ltd through it's subsidiary - Independent Media Trust.

TV18 Broadcast Ltd will use these funds to retire debt and buyout RIL's stake in Eenadu Group of channels run by the Hyderabad-based Ramoji Rao.

According to the filing on BSE, TV18 Broadcast is acquiring (i) 100% interest in regional news channels in Hindi namely ETV Uttar Pradesh, ETV Madhya Pradesh, ETV Rajasthan and ETV Bihar and ETV Urdu channel ("ETV News Channels"); (ii) 50% interest in ETV Marathi, ETV Kannada, ETV Bangla, ETV Gujarati and ETV Oriya ("ETV non Telugu GEC Channels") and (iii) 24.50% interest in ETV Telugu and ETV Telugu News ("ETV Telugu Channels"). TV18 will have Board and Management Control of ETV News Channels and ETV non Telugu GEC Channels.

TV18 also has an option to buy the balance 50% interest in ETV non Telugu GEC Channels and additional 24.50% interest of ETV Telugu Channels.

Ernst & Young was the financial advisor to the deal while the legal due diligence was carried out by Khaitan & Co.

Simultaneously, Network18 and TV18 have also entered into a MoU with Infotel Broadband Services Ltd, a subsidiary of Reliance Industries Ltd, under which the Companies and their associates will have the right to distribute the (i) content of all the media and web properties of Network18 and (ii) programming and digital content of all the broadcasting channels (including the ETV Channels which are being acquired by the Company) through 4th Generation Broadband Network of Infotel. Infotel shall have preferential access to this content on a first right basis as a most preferred customer.

Both the acquirers - Network 18 Media and TV18 Broadcast are coming up with a rights issue of R2700Cr each. Network18, being the promoter and holder of majority equity in TV18, will subscribe to about R1,400Cr in the rights issue of TV18 – therefore, once this subscription amount is netted out, the Net Aggregate Rights Issue of both Network18 and TV18 will result in a fund raising of about R4,000Cr.

The contribution of the current Promoter Entities of Network18 in this Net Aggregate Rights Issue of both Network18 and TV18 will be about Rs 1,700Cr (R1500Cr of this R1700Cr will be raised from RIL).

TV18 will utilise the Rights Issue proceeds to repay the existing debt, fund the acquisition of ETV Channels and fund working capital needs. Network18 will utilise the Rights Issue proceeds to repay the existing debt and subscribe to the Rights Issue of TV18.

This transaction will allow existing investors like Nimesh Kampani of JM Financial to exit. In 2008, Nimesh Kampani of JM Financial came on board of Ushodaya Enterprises Pvt Ltd, the holding company of ETV, by investing $578 Mn in the company. His investment allowed Ushodaya get out of another deal the Rao family was originally planning with Blackstone Group to sell 26% stake for $275Mn.ETV Channels have been on the block for quite some time now. In July, Ramoji was talking to Sony TV but the talks fell through as Eenadu promoters were exploring an all cash deal. Rajeev Chandrasekhar of Jupiter Capital was also interested in acquiring these media properties.

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