Ambanis In Bid To Hike Foreign Equity In Mudra To 74%

Mudra Communications, promoted by the Ambanis, has sought the clearance of the Foreign Investment Promotion Board to hike the foreign equity portion in the advertising and public relations agency from 10 per cent to 74 per cent.

Industry sources said the Ambanis had asked for government permission to include a blanket enabling provision which would allow them to increase the foreign equity in Mudra.

If the government approves the move, Mudra will become the first Ambanis-controlled company in which the family would dilute its stake from a majority position to a minority. However, the Ambanis will continue to retain the blocking vote on the company board with the remaining 26 per cent stake.

 

The measures under consideration of the Ambanis to exercise the option of increasing the foreign equity portion include tapping the overseas capital markets with a global depository receipts issue and a long-term bond issue.

Another option being weighed is to offload a part of the shareholding in favour of joint venture partner DDB-Needham of Britain which internationally handles Rupert Murdochs NewsCorp account.

DDB-Needham now holds a 10 per cent stake in Mudra Communications.

The Ambanis-controlled company is among the last of the top firms of its kind in the country to consider raising the foreign equity portion. Most of the top advertising agencies have already joined hands with international advertising giants either through technical collaborations or equity tie-ups.

Mudra was ranked third behind Hindustan Thompson Associates and Lintas in the seventh A&M Agency Report published on December 31 last year. It grossed an income of Rs 46.78 crore in 1995-96, with a capitalised billing of Rs 312.01 crore. Some of the major accounts with Mudra are McDonalds, Samsung India Electronics, Cadbury Schweppes, Rothmans, Indian Oil Corporation and Sidbi.

A debate had been going on for some time in Mudra on whether the agency, which has stood independent, should follow the methods adopted by other advertising agencies by going in for a major foreign partner which would pick up a substantial stake.

According to industry sources, the Ambanis had been against a move to dilute their stake.

However, a consensus seems to be emerging in favour of offloading 25 per cent equity in favour of DDB Needham. The consensus has emerged primarily because of a feeling that a multinational corporation entering the country might prefer to work with its own international agency through its local partner.