In the second instance of foreign direct investment in an Indian general newspaper, Independent News & Media Plc of Ireland on Wednesday announced that it would acquire a 26 per cent stake in Jagran Prakashan Pvt Ltd for 25.5 million euros (Rs 149.24 crore). Subject to clearances from the government, the deal is expected to be closed in early 2005.
The deal puts a valuation of Rs 574 crore (Rs 5.74 billion) on Jagran Prakashan. Hindustan Times, which was the first general newspaper to get FDI when Henderson picked up a 20 per cent stake for Rs 125 crore (Rs 1.25 billion), had been valued at Rs 625 crore (Rs 6.25 billion).
Kanpur-based Jagran Prakashan is the owner of Dainik Jagran, a Hindi newspaper with a readership of more than 16 million from 25 editions in the North. Independent News has media interests in Ireland, Australia, New Zealand, South Africa and the United Kingdom.
Jagran Prakashan will use the proceeds from the deal to fund its expansion plans in news publishing. "The money will be used to fund future growth, including launches in new markets, and to consolidate our existing operations," said Shailesh Gupta, a director of Jagran Prakashan.
Final plans will be drawn up once the board is reconstituted after the acquisition. The company expects revenues to grow at more than 25 per cent annually, with subscriptions rising at about 15-20 per cent.
The structure of the deal was yet to be finalised, sources added. Under the rules, only half of the shares acquired by a foreign company can be transferred from existing promoters. The rest have to be in the form of fresh equity.
On its part, Independent News said the acquisition would be financed from its existing cash balances and was expected to enhance earnings immediately.
Jagran Prakashan was at the forefront of the long battle waged by several Indian media companies to allow FDI in news publishing. The government allowed 26 per cent FDI in news publications in 2002.
Foreign media companies have been increasingly interested in the fast-growing market since it opened up. India's print media garner about Rs 5,400 crore (Rs 54 billion) a year in advertising revenue, and regional language newspapers account for the lion's share of these, according to industry estimates.
Jagran is at the forefront of the regional boom. Established in 1942, the company is controlled by the Gupta family. Its readership of 16 million is among the largest in the world and its circulation is among the fastest growing at 10-20 per cent.
"There is no denying the potential. Penetration of print is low, and literacy levels are picking up," said Karthik Jayaraman, head of print investments at Starcom Worldwide, a unit of the Publicis Groupe.