Mid-Day''s Express liaison sizzles the media world

The last, has not been heard on the sale of Mid-Day Multimedia's 10 per cent stake to Indian Express Newspapers (Bombay) Ltd last week, which deprives the Times group a foothold in Mumbai's largest-selling eveninger, Mid-Day.

Mumbai-based media owner Tariq Ansari's decision to offload 10 per cent of his family's stake in Mid-Day Multimedia Ltd (MDML), announced early last week, has made news for two reasons. The sale was effected in the group's silver jubilee year. But more importantly, the stake was picked up by another media entity, the Indian Express Limited.

The announcement by the National Stock Exchange (NSE) about the transaction on March 3, 2005, put to rest all speculation about brothers Sameer and Vineet Jain of Bennett, Coleman and Co. Ltd (colloquially referred to as the Times Group) — India's largest media house and publishers of the Times of India, Mumbai's largest-selling daily — scouting around for an additional stake to increase their 7.7 per cent holding in MDML.

Last year, Bennett, Coleman & Co is also reported to have offered Rs100 crore to Ansari for his family's 68.9 per cent stake in MDML. It is widely believed that Ansari roped in the Goenka family of the Express group as a white knight to thwart the Jains from adding MDML to their kitty.

But media critic Pradyuman Maheshwari, a former deputy editor of Mid-Day, calls the deal "bizarre". He adds, "I don't think Express brings much to the table, but for credibility and integrity, which Mid Day, too, has." Yet, Maheshwari, whose popular media-related blog, Mediaah!, had been running stories against the Times group upping its stake in MDML, says he is relieved that finally it is Express and not the Times.

MDML publishes three newspapers in English and one each in Gujarati and Urdu. It has also been in the outdoor advertising business since 1997. And GoFM 92.5, its FM radio station, has occupied a niche with an emphasis on Mumbai city. But the group's raison d'être continues to be its flagship tabloid Mid-Day, newly aggressive (of the Kareena Kapoor-Shahid Kapoor titillating tongue-locking episode) and a publishing success on the back of its round-the-clock, multi-edition marketing strategy.

For the financial year ending March 2004, on sales of Rs93.11 crore, the company made a net profit of Rs9.07 crore. Since MDML is the only Mumbai-based publicly-traded media company in the newspaper business, it is difficult to compare the financial performance with its rivals. But it is widely believed that the FM-radio segment is a big drain on the company.

The main problem here seems to be the exorbitant license fees charged by the government. For April-December 2004, the topline grew by 77 per cent to Rs4.57 crore compared to the same period the previous year. But it did not help much for over the same period, the licence fees shot up by Rs1.19 crore to Rs8.34 crore. Along with other radio stations, Go FM 92.5 has been periodically making representations to the Information & Broadcasting ministry for rationalising the fees.

"The radio business will be an extremely attractive one when the government changes the license-fee regime," Ansari told Mediaah!, "Go has half-a-million listeners in the Mumbai and a distinctive brand. However, we have already informed the government that if there is no change in licence fees, Go will exit the market."

Even though radio continues to hit the print division's bottomline, MDML remains attractive for investors on account of its attractive profitability ratios. Between financial years 2003 and 2004, the operating profit margin increased from 11.61 to 18.35 per cent and the return on capital employed from 7.98 to 14.46 per cent. During the same period, the return on net worth shot up from 4.28 to 10.06 per cent.

It was on 28 October 2004 that the Times group had bought into MDML. The 7.7 per cent stake was picked up from the open market in two tranches and had at once belonged to disgraced stock broker Ketan Parekh. Exactly two months later, well-known broker Rakesh Jhunjhunwala bought a 5.28 per cent stake in the company for Rs11.26 crore. Most of these shares were sold by members of the Ansari family in a block deal.

Jhunjhunwala, who has also taken large positions in other media-related companies like CRISIL, is looking at MDML as an investment but the two media companies are clearly eyeing the newspaper business of the company — which contributed to 79 per cent of the total revenues last year — purely for its long-term potential.

Maheshwari feels Express will use the 10 per cent stake to increase its IPO profile. Indian Express Newspapers (Bombay) Ltd is reported to be planning to hit the markets within the next quarter with a Rs100-crore issue. Media watchers are looking at this development as a direct fall-out of the Indian government's decision to allow 26 per cent foreign direct investment (FDI) in print media. Earlier, the Hindustan Times had sold 20 per cent of its stake to Henderson Global Investment while the Deccan Chronicle had mopped up Rs130 crore from the bourses through an IPO.

Consolidation is the name of the game and the active players are either in the process of strengthening their home turfs or moving into new ones. The most frenzied activity seems to be in the Mumbai market, which is believed to throw up a whopping Rs2,000-crore worth of advertising every year.

The Hindustan Times, the long-standing market leader in New Delhi, is believed to have firmed up plans for launching a Mumbai edition by May 2005. Kolkatta-based media baron Aveek Sarkar of the ABP group (publisher of the Bengali daily Anand Bazar Patrika) is known to be eyeing the Mumbai market as a possible extension for his Telegraph morninger. And the recent tie-up between Zee Telefilms (telecasters of Zee TV, Zee News, Zee Cinema, among others) and the north-based Dainik Bhaskar group is also looking at the English daily slot in Mumbai.

All of them are lured by the huge dollops of advertising that the Times of India manages to mop up every year, a 50 per cent market share, according to one estimate. The Times Group, of course, would have benefited from owning a larger chunk of MDML. As Maheshwari remembers, "Samir Jain once said that he likes a Mid Day to grow small clients who one day will become Times of India's advertisers."

As of now, however, it will have to do with its miniscule stake. Ansari has said his family does not plan to further dilute its 53.6 per cent holding in MDML. But he has also added that there's no preventing anybody — including the Times group — from picking up shares from the market.

The last, therefore, has not been heard on the attraction of big media barons for Mumbai's small newspaper.