Walt Disney Co. plans to sell its entire stake in India’s largest satellite TV operator Tata Play Ltd during its planned initial share sale as the American entertainment conglomerate looks to focus on its broadcasting and streaming services business in India.
On November 29, the satellite TV operator, formerly Tata Sky, submitted a confidential offer document for the IPO to the market regulator. According to the so-called pre-filing, Disney plans to sell its entire 29.8% stake in Tata Play, two people who were aware of the development said.
Tata Play was the first company to file a confidential draft IPO after new Sebi guidelines allowed companies to protect confidential business information, a concept popular with tech companies in the US.
“Disney has decided to sell its stake in Tata Play and is offering all of its shares in the upcoming IPO,” one of the two people quoted above said on condition of anonymity.
“Nowhere in the world is Disney interested in the distribution business. It’s a storyteller,” he added.
Disney inherited Tata Play’s stake when it acquired 21st Century Fox’s entertainment business from Rupert Murdoch. In 2019, internal talks about an exit began. However, the IPO plans were repeatedly postponed.
A spokesman for Disney Star, Walt Disney’s local unit, declined to comment, while a spokesman for Tata Play did not respond to inquiries.
Incidentally, ownership of Tata Sky has been a source of conflict between Disney and India regulators and the Ministry of Broadcasting. India allows 100% foreign direct investment (FDI) in the satellite television sector, but has capped the maximum stake a broadcaster can own in a direct-to-home (DTH) TV operator to 20%.
In 2004, Murdoch-owned Fox formed a joint venture with the Tata group, as foreign direct investment in DTH was limited to 20% at the time. While the FDI cap was later removed, the cross-media ownership rule remained in the DTH licensing policies, allowing a foreign company to own up to 20% of the shares.
However, in FY2010 the government issued a press release that defined Indian ownership and control rules so that if a foreign firm invests through an Indian-owned investment company, the investment is considered Indian.
Taking advantage of regulation, Fox and the Tata Group formed TS Investments which acquired 20% of Tata Play and Fox received an additional indirect stake of 9.8% in Tata Play. “Current Indian management under K. Madhavan believes that acquiring stake in Tata Play was a mistake. It was under James Murdoch and Uday Shankar that they set out to grow aggressively, acquiring minority stakes in both DTH and a cable company (Hathway Cable and Datacom). Fox later sold its stake in Hathway to the promoters but increased its stake in Tata Play,” the second person said.
Although neither the DTH policy nor the press release mentioned that the foreign firm could increase stakes in a DTH operator above 20%, Fox received approvals from the Department of I&B and was never challenged. “Since 2018, the ministry has asked Tata Play to clarify the involvement. For Disney, a company very conscious of its function-by-book image, this was a gray area,” said the person cited above. They have since decided to exit the joint venture.”
Tata Play is considering an IPO of €2,500 crore and has retained Kotak Mahindra Capital, Citi, Morgan Stanley, IIFL and Bank of America as bankers and corporate law firm Cyril Amarchand Mangaldas to advise on the IPO and subsequent listing.
As of June 30, Tata Play had 22 million paid subscribers. In FY22, the company had sales of €4,741 crore and a net income of €68.6 million.
Baytree Investments (Mauritius), a unit of Temasek Capital, acquired 10% of Tata Play in 2008 and is likely to exit as well.
The Tata Group owns the remaining 60.2% stake in Tata Play.
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