Nimbus looking at selling stake in Neo Sports

Promoters feel that the sale could get them anything between Rs 400 to 600 cr

Nimbus Communications and the other promoters of Neo Sports Broadcast, which runs two sports channels in India (Neo Sports and Neo Prime) are open to divesting up to 100 per cent stake in it.

The troubled sports broadcast company is in talks with prospective buyers from India and abroad and is looking at sealing a deal by the end of the next calendar year.

Harish Thawani, founder of Nimbus and chairman, Neo Sports, says: “We have active interest from three international players, and sometime in mid 2015 will consider divesting 26% or more in Neo Sports. If the price is right we will consider a 100% sale too”

The company’s sale, he says, would fetch Nimbus and the other promoters Rs 400-600 crore, depending on how much is divested. The valuation has been worked out at 15-20 times the multiple of expected profit in the current financial year (about Rs 20 crore, according to Thawani).

Nimbus is also preparing for the next leg of arbitration with the Board of Control for Cricket in India (BCCI), on the termination of broadcast rights for India matches organised by the latter. The company had won the rights in 2009 for six years, at a reported cost of Rs 2,000 crore. In December 2011, the cricket body terminated the contract, resulting in legal proceedings by Nimbus. BCCI’s reason was that Nimbus had failed to pay dues worth Rs 50 crore for the broadcast rights of India cricket matches. The first leg of the arbitration was in August this year and Nimbus’ claim for Rs 12 crore was upheld. The next arbitration proceeding, where Nimbus’ claim is around Rs 14 crore, is expected to take place in the first quarter of the next calendar year. The final and most important leg is expected in June-July 2015 — the claim from Nimbus amounts to Rs 4,000 crore. Thawani says Nimbus and the other promoters of Neo Sports Broadcasting might reconsider selling the company if the arbitration goes in Nimbus’ favour.

“That’s a possibility, since we will then have the money to bid for bigger (sports) properties. However, as of now, we are keen on getting a strategic investor on board or selling the company outright, whichever works out best to everyone’s satisfaction. Also, I feel the Indian sports broadcasting sector is going through a phase of irrational exuberance and acquisition of sports properties has become very expensive. We are not sure we want to play in such an environment. It’s better to let the ones with the deeper pockets take over (the sports broadcasting space) in this case,” says Thawani.

Meantime, the broadcaster is focusing on acquiring and maintaining tier-2 sports events in tennis, football, and motor sports. It currently airs tournaments such as the French Open and Davis Cup in tennis, the PFA Tour in golf, Bundesliga in football and the Sultan Azlan Shah Cup in hockey, among others. It also has the rights to air an international cricket tourney in Bangladesh.

“When hit with a setback like the one in December 2011, we realised that some rejigging will be required at both Nimbus and Neo Sports. Thus we started a cost cutting exercise. Luckily in a way, we had some natural attrition at Neo Sports so we did not need to lay people off as such. Next we also relooked at the sales strategy and got a team that was good at cracking the smaller deals. Then for Neo Sports, we consciously started focussing on the lower end of tier 1 sports events and tier 2 events as acquisition targets. These properties are less expensive and hence achieving break-even and profitability is easier. That is how we have managed to be profitable as a sports broadcast network as well,” says Thawani.

He founded Nimbus in 1987 and currently holds around 29 per cent stake in the company, which makes him the single largest shareholder. Other investors include 3i, Cisco and Oman Investment Fund. The three came on board in 2007, infusing nearly Rs 350 crore into Nimbus.

THE ‘SALE’ WAY OUT

• Nimbus Communications-owned Neo Sports Broadcast runs two channels — Neo Sports and Neo Prime
   
• Promoters looking to divest stake between 26 per cent and 100 per cent in 2015
   
• Active talks on with three international players according to Chairman Harish Thawani
   
• Neo Sports Broadcasting could fetch Nimbus Communications and fellow shareholders in the broadcast company between Rs 400 to 600 crore
  

 

The broadcast company currently has telecast rights to the PGA Tour in golf, French Open in tennis, Bundesliga in football and international cricket in Bangladesh, among others