Intelís stake in INCablenet: Complex deal, complex valuations
One of the bigger venture capitalists in the infotech, communication and entertainment sectors seems to Intel Capital, the venture capital arm of Intel Corporation. The company has picked a 49% stake in Grant Investrade (a subsidiary of Hinduja Finance) which in turn holds a 6.7% stake in IndusInd Media Communication (IMC) the owner of the multi system cable operator under the brand name INCableNet.
Grant Investrade is only a Special Purpose Vehicle (SPV) which currently is a fully owned subsidiary of Hinduja Finance and has an equity of Rs 211 m. This would go up to Rs 415 m after the deal.
The other major shareholder in IMC is ALIT which owns a 55% of the company. Hinduja Finance owns a 51% of ALIT. Thus Hinduja Finance owns around 29% of the IMC.
INCableNet has claimed a reach of 4 million homes out of a total cable and satellite market of 25 million homes. However, the fact remains that the ownership of the last mile connectivity remains with the local cable operator who can easily switch allegiances to the rival multiĖsystems operator Siticable. INCableNetís own reach (i.e. where the company directly collects the subscription revenue by delivering cable TV) is reportedly around 1 million homes.
Even if one were to take the companyís own reach to be 4 million homes, the valuation at the stated price of Rs 68 bn, amounts to almost $ 386 (or Rs 17,000) per home. Cable subscribers on an average pay Rs 100Ė125 per month and thus the current valuation of Rs 17,000 per cable home amounts to almost 136 months rent which seems to be on the higher side. Perhaps, the only explanation for this is the fact that the company would offer Internet access through cable to its subscribers. However, the management has not communicated plans for the same.
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