Equity fund, media house to buy majority stake in TV9

Venture capitalist Srini Raju is set to conclude a deal involving the sale of a majority stake in Hyderabad-based Associated Broadcasting Company Limited held by iLabs Venture Capital Fund.

ABCL owns the TV9 media house, which runs satellite television channels in several regional languages, including Telugu. iLabs is promoted by Raju.

Edelweiss Financial Services has been putting together the deal, which has been 'agreed in principle', with a combination of an equity fund and a media house from western India that are jointly acquiring  iLabs' stake in the company.

A source close to Raju said it might take a couple of more weeks to conclude the deal, as bankers and investors are working out last-mile details as to who brings how much funding into the deal.

iLabs currently holds about 60 per cent equity in TV9.

"Also, it is still open as to whether the investors would seek to buy the entire 60 per cent equity or would want iLabs to retain a small part of it to continue our relationship with ABCL," the source told Business Standard.

Raju 'is willing to accept the offer either way'.

The deal size is expected to be over Rs 500 crore (Rs 5 billion).

Raju, who has been in negotiations with various prospective buyers for the last three months, was originally offered to sell 35

per cent stake.

The investor firms started discussions with Raju on the premise that they would take majority equity in ABCL, it is learnt. iLabs' stake reduced to its current level two years ago after it sold about 20 per cent stake to SAIF Partners, a venture capital fund.

The promoters holding stays at about 20 per cent held by TV9 chief executive officer Ravi Prakash and his associates.

ABCL currently operates seven regional channels: two in Telugu, one in Kannada and one in English for Karnataka and one each for Gujarat and Maharashtra.

TV9 has set itself an ambitious target of expanding to more regions in the country, apart from launching an exclusive channel for the National Capital Region.

Raju's decision to exit from ABCL is expected to help TV9 mobilise the required fund, as the new investors are also said to have been equally ambitious to make TV9 a national player.

Raju invested close to Rs 80 crore (Rs 800 million) from the first round of iLabs Capital fund in ABCL -- from 2004, when it started first TV9 news channel.