How a dormant shell company became India's biggest media group
Network18 began life in 1996 as an inactive finance firm with no clear purpose. A regulatory squeeze turned it into the vehicle for a fast-growing news empire, and runaway expansion then left that empire so indebted that it ended up controlled by Reliance Industries, India's energy giant headed by Mukesh Ambani.
The founders of the news broadcaster Television Eighteen, Raghav Bahl and Ritu Kapur, floated it on the stock market in 1999 to a rapturous reception: investors offered more than 50 times what was sought. The catch was that their own holding shrank from 75% to about 26%, and broadcasting rules required Indian promoters to own over 51% to open a new uplink. That blocked their planned Hindi business channel, CNBC Awaaz. Their workaround, in 2003, was to buy the dormant SGA Finance, fund it themselves, and route the new channel through it. After rounds of restructuring ending in 2006, the shell became the parent of Television Eighteen and was renamed Network18.
Growth was dazzling. Bahl lured the star editor Rajdeep Sardesai away from the rival NDTV to launch CNN IBN in 2005, and from 2008 the group added a film studio, a shopping channel, an Indian edition of Forbes, a Marathi news venture and a general entertainment partnership with Viacom. The spending outran the earnings. Net losses followed each year from 2008 to 2011, with the Viacom venture a particular drain, and by September 2011 debts exceeded ₹1,400 crore.
Bahl turned to Reliance. His chief executive, Haresh Chawla, quit in protest, preferring to sell part of the Viacom stake; one senior editor described the talks as Bahl facing a pact with the devil. The deal announced in January 2012 channelled ₹5,400 crore through a Reliance-created trust and a web of shell companies, in the form of debentures convertible to shares within ten years. It also obliged Network18 to buy Reliance's holdings in the ETV channels.
Completed in 2013, the transaction made Network18 India's largest media group, ahead of Rupert Murdoch's Star India and the Times Group. The debentures opened the door to a hostile takeover in 2014, and Reliance now owns 56.89% of the company.
Source: Network18 Group
