Economic Times - Mumbai, Monday Jan
08 - Jan 14 2001
HINDUJA Finance is not a finance company as denoted by its
name. The company is the face of Hinduja group's investments
into the New Economy sector.
this company offers investors a play directly to information
technology, cable television, internet service provider, movie
channel, cellular telecom and broadband access. It has mastered
the last mile access, which is considered valuable in the
context of new economy play and enhancing its brand value
through city specific channels.
the businesses, it has partnered with leading international
players and the businesses have been organised through subsidiaries
and joint ventures. The Hinduja family is swapping the stake
held by it in various businesses for Hinduja Finance's equity.
result in the entire investment of the Hinduja group in convergence
and new economy areas being held through the HF shareholders.
In the diluted equity of Rs 45.70 crore in April 2001, the
Hinduja family would hold nearly 80 per cent of the equity.
This bodes well for the remaining shareholders of HF as wealth
creation for Hinduja would also mean wealth for minority shareholders.
focus of the company would be twofold. HF would be the operating
IT company that draws on synergies arising from its key focus
areas. The existing equity trading and finance activity would
be hived off from the company in due course.
of Hinduja group's media and telecom assets helps in leveraging
the consumer access and content of these businesses to foster
convergence process being witnessed globally.
parenting role, HF would provide overall strategic direction
for these businesses and proactively address emerging opportunities,
thereby creating significant incremental value. We take a
look at what HF is all about.
THE IT initiative came through the merger of Ashok Leyland
Information Technology with HF. Though revenues were small,
in the region of Rs 15 crore, it was essentially because ALIT
could not focus on business development till last year, due
to pre-occupation with Y2K work and lack of focus pending
identified IT enabled services as a key thrust area and has
focussed intensively on marketing and building client relationships
during the last one year. In June 2000, the IT division entered
into a large contract for IT enabled services with a Fortune
has the potential to generate revenues of upto $100 million
over the next 3 years. The company is in the process of scaling
up its work force and upgrading its facilities to execute
year's financials reflect revenues from IT operations. Global
relationships of the promoters will help bring business to
Media & Comm
HF would have effective holding of 62 per cent in IMC's equity
while Intel will hold 3.3 per cent stake. Intel's investment
at $49.23 million has given the company a benchmark valuation
of Rs 6800 crore in May 2000.
has built up India's largest cable television network covering
10 major cities in India including Delhi, Mumbai and Ahmedabad.
It currently provides multi-channel transmission services
to approximately 10 million subscribers under the brand name
among the 10 largest cable TV operators in the world in terms
of subscribers. IMC is well advanced in its plan to develop
a pay TV platform with interactive TV/internet capability.
The company is gearing itself to raise money on the Nasdaq
or attracting strategic /financial investments for expanding
HF has an effective holding of 51.35 per cent of CVIL's equity.
CVIL owns and operates the popular Hindi movie cable channel
CVO. It is among the widely viewed cable channels in India
with coverage of over 6 million households in 108 centres
across the country.
asset is its valuable library of over 1800 Hindi movies, the
largest in India. The company registered profits from its
operations in the very first year, possibly the only channel
in India to do so.
THE television programming division of IMC was spun off into
a separate company IEL. It produces television content and
operates a bouquet of popular city specific cable television
channels under the umbrella "IN" brand.
channels are available in 4 cities like Mumbai, Delhi, Bangalore
and Indore. The bouquet of IN channels offers a unique local
flavour in programming content on a city specific basis. IN
channel pioneered the concept of interactive television in
India with IN Mumbai.
to the coverage of local events, the IN bouquet also airs
local news bulletins in various languages.
has rights to more than 15,000 hours of television software
relating to serials, event coverages, talk shows, music programmes
and hundreds of hours of news coverage.
the the nucleus around which HF proposes to build content
capabilities. IEL is planning various initiatives to strengthen
the IN brand in coordination with HF's plans to offer broadband
to acquire a horizontal portal targeted at the global Indian
community to enrich its content delivery. HF has effective
100 per cent equity of IEL.
HF holds 100 per cent equity of In2Cable which has a national
level ISP license and an exclusive arrangement with IMC for
providing internet services over the existing cable network.
with IMC's expansion plans, In2cable aims to roll out internet
services in 49 cities and achieve a subscriber base of over
1 million by the fourth year of operations. It has already
commenced offering broadband internet access over IMC's cable
network in Mumbai and Bangalore.
generation of internet would be broadband driven. In2cable
would emerge as one of the largest Indian ISPs providing digital
TV, data, entertainment, games, video conferencing and telephony.
HF owns an effective stake of 22 per cent in Fascel, the Gujarat
circle cellular operator. The company is looking actively
at leveraging its assets in terms of its network backbone
to offer long distance services and significant subscriber
reach to address convergence opportunities.
is in the process of increasing its fibre optic backbone to
over 1000 kilometres, forming the basis of a future broadband
HF's equity will grow to Rs 45.70 crore in April 2001 after
effecting the merger of all investment companies holding media
assets of the group. IT would also result in an approximate
increase in networth to Rs 344 crore, from Rs 150 crore at
the beginning of the year.
contemplating private placement of its shares to raise resources
for growth of media assets. It is looking forward to raise
between Rs 300 crore to Rs 350 crore through an issue of 50
lakh shares, implying a price between Rs 600 to Rs 700 per
THE sum of parts valuation for HF is a whopping Rs 900 per
share on the diluted equity of Rs 45.7 crore. The finance
division is valued at Rs 104 crore, taking a conservative
40 per cent discount to HF's book value of investments as
on March 31, 2000.
been valued at Rs 500 crore, assuming 25 times multiple on
a net profit base of Rs 20 crore for FY 2001. The stake in
Fascel has been valued at Rs 220 crore based on Hutchinson's
transaction. IMC has been valued at Rs 2976 crore.
the Intel deal has valued IMC at $1.5 bn, this valuation has
been arrived at by taking a 30 per cent discount to the valuation.
The stake in CVIL has been valued at Rs 138 crore, taking
the value of 1800 movies, with each movie valued at Rs 15
lakh. This brings the total valuation to Rs 4040 crore.
diluted equity of Rs 45.70 crore, the NAV per share works
out to Rs 884. Against this, the scrip is valued at mere Rs
146. This represents a discount of over 80 per cent.
CURRENT market valuations do not reflect HF's true worth,
due to two reasons. One, the convergence business as well
as the strategy is not understood by the market and two, Hindujas
do not enjoy a good track record for creating value for minority
the gap between present and intrinsic valuations is too high,
even if the risks are discounted. Hindujas would own 75 per
cent (80 per cent now) the diluted equity after the private
placement. Since HF is only the face of the family's foray
into the convergence areas, we believe that efforts would
be made to effect better valuations.
cap would also be used to raise funds. Other group entities
would also raise funds in due course. This would serve two
objectives - one, benchmarking valuations and two, create
better visibility for the group's convergence strategy. We
recommend a BUY on declines with a one-year perspective.