MUMBAI–Indian direct-to-home television-service provider Tata Sky Ltd. is likely to apply soon for an initial public offering to raise 25 billion rupees ($466.2 million), according to a person involved in the process.
The company recently selected investment banks Kotak Mahindra Capital Co.,500247.BY +0.64% Morgan Stanley MS -1.35% and Citigroup Inc. C +0.57% to manage the offering, this person said.
Tata Sky–a 70:30 joint venture between India’s Tata group and Star Group–declined to comment. Star is a television unit of News Corp NWSA +0.88% ., which owns Dow Jones & Co., publisher of The Wall Street Journal.
The company is likely to file a draft prospectus with capital-market regulator Securities and Exchange Board of India as early as February, the person said. It plans to use the proceeds to pay off its debt and to fund expansion within India, the person added.
Tata Sky competes with state-run DD Direct, Bharti Airtel Ltd., 532454.BY -1.82%Reliance Communications Ltd., 532712.BY -3.86% Dish TV India Ltd.,532839.BY -1.01% Sun Direct TV Ltd. and Videocon Group 511389.BY -1.50% in India’s direct-to-home TV-service market.
Last month Videocon Group’s Bharat Business Channel Ltd., which provides services under the brand name Videocon D2H, filed a draft prospectus for an IPO to raise up to 7.0 billion rupees ($130 million). Of this, it would consider raising up to 500 million rupees by selling shares to certain investors before the issue opens for public subscription, according to the draft prospectus.
Bharat Business Channel’s company secretary, Amruta Karkare, didn’t immediately comment on its IPO plan Thursday.
Subject to regulatory approvals, Bharat Business Channel expects to list in March, one person involved in the process said recently.
India’s TV market was estimated to be $6 billion in 2011, according to a report last year by KPMG and the Federation of Indian Chambers of Commerce and Industry.
But India’s nascent direct-to-home TV-distribution companies get a relatively small piece of this pie, say analysts. Most of these companies have been bleeding because of heavy debt and lower-than-expected sales amid high competition.
Bharat Business Channel, which commenced commercial operations in July 2009, said in its prospectus that it had incurred losses every year between 2009 and September 2012, adding up to around $260 million in losses. This was despite massive growth in its subscriber base and revenue, according to the filing. The company had around $350 million in debt as of Oct. 31.
But the prospects look better, thanks partly to India’s push for greater digitization.
The federal government has set a deadline of December 2013 for all cable-TV networks to convert their transmission signals to the digital format from analog. This may lead more people to sign up for direct-to-home TV services as they are already digital.
Bharat Business Channel, like Tata Sky, plans to use its IPO proceeds to expand the company’s business as well as to retire some debt.
The Bharat Business Channel IPO is being managed by five banks, including Axis Bank Ltd.’s 532215.BY +0.07% Enam Securities Pvt. Ltd., UBS Securities India Pvt. Ltd. and IDBI Capital Market Services Ltd., according to the prospectus.