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SET India, Discovery agree on 74:26 distribution JV

Partha Ghosh

SET India (Sony Entertainment Channel) and Discovery Communications India (Discovery Channel) have decided on a 74:26 equity shareholding pattern for their proposed downstream joint venture for distribution of audio-visual programming.

Under the agreement, both SET and Discovery will have the option to convert the subsidiary into a 100 per cent company in the future if either of the companies wishes to sell all or part of its shareholding in the joint venture, sources said on Friday.

Executives at both the companies declined to comment, citing a mutual agreement not to talk about the equity structure and other plans before requisite regulatory approvals were through.

A joint official announcement will be made, thereafter, they said. The proposed company will, in the beginning, provide services for cable and satellite channels like SET, Discovery, SET Max, CNBC, Animal Planet and AXN. In the future, it may provide such services to other cable or satellite channels as per the prevalent laws.

It is reliably learnt that SET will invest Rs 50 million in the joint venture's paid-up capital of Rs 65.8 million, the remaining being pumped in by Discovery.

No fresh foreign equity investments are involved in the project as it will be capitalised by investments made by two operating Indian companies.

The initial investment in the joint venture will be made from the accumulated profits of the two operating companies. If more money needs to be pumped in, it will be raised through shareholders' loans.

The dividends from the proposed joint venture will flow back to SET India and Discovery India, respectively. The parent companies of both the operating companies have sent in their no-objection to the deal, sources said.

The existing collaboration arrangements between SET India and its parent, Sony Pictures Entertainment, and between Discovery India and the Discovery Group, will be sub-licensed to the proposed joint venture.

Sony Picture Entertainment holds a 60.57 per cent shareholding in SET India through its two Mauritius-based subsidiaries -- SPE Mauritius Holdings Ltd and SPE Mauritius Investments Ltd.

Around 31.63 per cent of the shares are held by Indian shareholders and 7.8 per cent by foreign institutional investors.

SET India is engaged in the sale of advertising time for SET Satellite (Singapore) Pte Ltd, a Singapore-based satellite television channel. SET India also collects revenue in connection with such sale.

Discovery Communications India is a 100 per cent foreign held company. Discovery Channel (Mauritius) holds 98 per cent, Discovery Communications Ltd, LLC, US, has 1 per cent and Discovery Production Inc, US, has the balance 1 per cent.

Discovery Communications India is engaged in marketing of airtime of Discovery and other channels, and distribution of the programmes of Discovery Channel and other channels to cable operators.

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