By Anushi Agrawal and Devi Leena Bose
The study aims to look at the ownership structures within the Indian cable TV distribution sector and the factors that give rise to certain ownership structures and their possible implications. The study is a part of the project, Tracking Access under Digitalisation. This is the second post in a three-part series of write-ups on major national cable MSOs in India. The first post of the series can be found here.
The First Gulf War acquainted sections of urban Indian middle class with the taste of the satellite world. Sensing a new opportunity, scores of entities entered the cable distribution sector. Even large conglomerates like Zee Group in partnership with global News Corp, and Hinduja Group invested in the sector. This marked the birth of the national MSOs. Although the market remained unorganised, fragmented and unregulated, new national and regional competitors entered the sector. In 1998, the Rajan Raheja Group, ventured into the cable business with 100%-owned Hathway Cable & Datacom. It formed a Joint-Venture (JV) with global News Corp in 2000 after the latter withdrew from a JV with Zee.
Hathway Cable is part of a Mumbai-based conglomerate, with presence in sectors like real estate and construction, cement, tiles, batteries, plastics, insurance, organised retail, hotels and hospitality, software and media. As of March 2014, it offered cable services across 140 cities with a subscribers’ base of over 11.8 million. It went public in 2010, which reduced the individual stakes of the two original partners, Rahejas and News Corp (Star Group), to 49.57% and 17.29%, respectively. News Corp sold its holdings to Macquarie Bank and Providence Equity Advisors Mauritius in March 2012.
Holding %age of the Promoter Group (March 31, 2013)
|Promoter Group||Percentage of Shareholding (%)|
|Hathway Investments Pvt. Ltd||10.45|
|Spur Cable & Datacom Pvt. Ltd||5.34|
Apart from personal stakes, the Raheja family members controlled the two promoter corporate entities. They held over 29% stake in Hathway Investments, and the remaining was with other investment companies owned by the Rahejas themselves. Akshay Raheja and three senior employees of Hathway Group were directors of Hathway Investments. Similarly, five corporate entities, which included real estate firms owned by the Rahejas, held a 20% stake each in Spur Cable & Datacom. Akshay Raheja and Viren Raheja were directors in Spur Cable, along with two Hathway Cable’s employees.
Given the unorganised and unregulated state of the sector, Hathway, like other national players, followed an inorganic growth strategy through slew of mergers and acquisitions. As of March 31, 2013, it comprised of entities including 43 subsidiaries. One of its subsidiaries, GTPL Hathway had 31 subsidiaries of its own, along with 50 JVs. Although it is common for subsidiaries of a parent company to have their own subsidiaries, such ownership has different implications in cable distribution. Since the cable business is geographically located, and the growth of the national MSOs like Hathway Cable was based on local M&A, some of the subsidiaries of the parent acted like sub-parents and pursued their own expansion strategies in consultations with the parent. This is especially true of GTPL Hathway, whose 81 subsidiaries and JVs are almost 60% of those of the parent, Hathway Cable & Datacom. Also Hathway Cable gave independence to GTPL Hathway to dominate specific regions and territories.
Therefore, the ownership links between the parent, Hathway Cable, and GTPL Hathway are somewhat unique. Let us try to first trace the birth of GTPL Hathway. As per Hathway Cable’s 2013 annual report, GTPL Hathway was incorporated in October 2007, and immediately the latter made a series of takeovers and acquisitions, initially in the state of Gujarat, in 2008, 2009, 2010 and 2011. In 2010, as per Hathway Cable’s prospectus, while the parent held 50% in GTPL Hathway, the remaining stake was distributed among individuals – Anirudhsinh Jadeja (24.87%), Kanaksinh Rana (8.87%), and Amit Jayantilal Shah (1.79%) – and a corporate entity, Gujarat Digi Com (14.47%), which was possibly owned by Jadeja, Shah and Rana. By March 2013, the shareholdings of the individual promoters came down a bit, and that of Gujarat Digi Com (20.4%) went up.
From information available in public domain, Jadeja was possibly the brain behind GTPL Group, along with Rana and Shah. The group started with one of its companies, Gujarat Telelink Pvt Ltd, or GTPL, and quickly expanded in Gujarat. Within a short time, it forged a JV with Hathway Group. However, given the local expertise – and possibly political clout within the state – Hathway Cable gave GTPL’s original promoters a free hand in its future expansion. On its website, www.gtpl.net, GTPL claims to be “India’s leading Multi System Operator”, and names Hathway Cable, the parent, as a “group” company, with the website’s copyright owner registered as GTPL Hathway.
Structure of GTPL Hathway Pvt Ltd (as of March, 2013)
Through GTPL Hathway, Hathway Cable, the parent, expanded in Gujarat and soon garnered a 70% market share. The former independently bought majority stakes in dozens of local MSOs and LCOs, which became its subsidiaries and JVs, and not of Hathway Cable. Therefore, GTPL Hathway continued an independent inorganic strategy, obviously in consultation with Hathway Cable. Surprisingly, over the years, GTPL Hathway expanded outside Gujarat too. It seemed as if Hathway Cable and GTPL Hathway had pre-decided the regions that will be the forte of each’s expansion strategy. According to a newspaper report in July 2014, “GTPL has already expanded into several geographies outside its home state of Gujarat. It has presence in West Bengal, Maharashtra, Madhya Pradesh, Bihar and Jharkhand, Andhra Pradesh and Assam.” These were apparently the states where Hathway Cable, and its other subsidiaries and JVs had little or no presence.
For example, consider GTPL Hathway’s presence in Kolkata, the capital of West Bengal. According to its website, “In 2005, a group of 160 cable operators in a very unique manner turned themselves into shareholders and made KCBPL a successful MSO in Kolkata Metropolitan Area (KMA). At an ongoing stage of business in 2010 Mr Bijoy Agrawal… led KCBPL to enter into a joint venture with GTPL which has enabled this new entity to become the leading MSO in Kolkata in less than 18 months.” The GTPL Group expanded in related areas too, especially in Gujarat. DL GTPL, one of the group companies, claims that it is “one of the largest Digital Cable TV and broadband services company in Surat and South Gujarat and spread up to Maharashtra borders.” Another group company, GTPL Kaizen, claims to be “a Premium Internet Service Provider company, operating currently in Gujarat.”
Hathway Cable also approved of GTPL’s foray into cross-media areas, like broadcasting. One of latter’s group entities, Gujarat Television, claims, “Since the day of launch on 28th December, 2009,” it “has travelled a long way with a super jet speed and marked a strong penetration to the tune of 80% in the State of Gujarat…. Today with eleven different channels with Gujarat Television Pvt Ltd stands alone at a unique placement with redefining the rainbow and breaking its limitations of seven colours.” Its bouquet of the channels includes news, cinema, music, and religious in Hindi, Sindhi and Gujarati languages. To understand the reach of these channels, Nirmana News claims “to reach out to Indians everywhere on the globe”, and GTPL News claims a “penetration in above 80% of Gujarati households.”
Clearly, Hathway Cable gave a lot of freedom to the individual shareholders of GTPL Hathway; it seems that these individuals were the original promoters of GTPL, and sold 50% stake to Hathway Cable. While this somewhat unique ownership-and-expansion strategy allowed the parent, Hathway Cable to reduce its management bandwidth and financial resources to emerge as a National MSO, it indicated a certain expertise, confidence and clout enjoyed by GTPL’s original promoters. It might also provide insights into Rajan Raheja’s, and other family members, management strategy to give more freedom to those who have the requisite skills, be it their managers, CEOs, or minority shareholders in subsidiaries.