How do we value Bennett, Coleman & Company Ltd?

Rohit Mathur - Televisionpoint.com | Mumbai
Investment or dis-investment, the first consideration is valuation. How do we arrive at the valuation of an unlisted media conglomerate such as Bennett, Coleman & Co. Ltd. (BCCL), the company owning the largest-selling English newspaper in the world. The Times Group is India's most profitable media company with about 50 per cent market share of English dailies in the urban markets.

The vast portfolio of BCCL today comprises of The Times of India, The Economic Times, Navbharat Times, Maharashtra Times, Sandhya Times, Mumbai Mirror, Zoom, Times Now, ET Now, Radio Mirchi, Times OOH, Indiatimes, Femina, Filmfare, Times Retail, Times Music, Times Multimedia, Indiatimes.com, Times Business Solutions, among others.

The BCCL valuation question also becomes important due to Times Private Treaties, which identifies and tempts promising advertising-shy companies to take media space in BCCL publications and media platforms in return for equity in those firms.

Media sector is a blend of film production, television content provider, music and broadcast. No single ratio such as operating/net profit margins, market capitalisation to sales or sales to gross block is viewed as a satisfactory evaluator or segregator of under priced or overpriced companies in the media sector.

The Times Group measures its achievements in terms of whether its brands have helped their respective audiences succeed in life, while enriching the business of relevant advertisers. That's a stringent benchmark, but BCCL's brands are renowned for their success in measuring up to the challenge.

Speaking on the methods of valuation an analyst with Bhash Media (which owns Televisionpoint.com) averred, "Electronic media is reasonably valued on the price earning (PE) multiples and discounted cash flow (DCF) models depending upon the steady state operations."

"For the radio industry, one can use DCF (3 or 4 stages) even a 2 to 3 stage DCF approach would be ideal. For print media, which is largely a commodity business, PE valuations are commonly used." he says.

Seshadri Bharathan, director, stock broking, Dawnayday AV, says it is evident that for a media conglomerate, sum of parts would be the best suited for valuation purpose. He supports the logic of sum of parts, in order to arrive at the valuation of an unlisted entity like BCCL.

Bharathan opines that the valuation should be based on valuation of its peer companies like Hindustan Times, investments and brand goodwill. This implies that one must look at the PE multiples plus book valuation. While others are of the opinion that strategic investments should not be considered for arriving at the valuation.

Equity analyst Tejinder Singh says for a media conglomerate, it is necessary to consider the readership and circulation figures, paid advertisements, number of channels, programme content, etc. before arriving at a valuation.

Well, it sounds very logical for a listed company, the process of valuation gets all the more complicated if the media behemoth under consideration is unlisted. The PE multiple principle can be applied for arriving at the valuation of a listed company, but the same cannot be conclusively applied to arrive at a Fair Market Value for a private or closely held company.

There are few who suggest that PE of a listed company can be used as a guideline or a benchmark when valuing a private company. As a general practice in the US, valuators rely heavily on PE of comparable public companies and these multiples are adjusted upward by a premium to represent control.

For the record, BCCL closed the 2008 financial year with sales of over Rs 4,000 crore, a net profit of close to Rs 900 crore and an earnings per share of Rs 271, a healthy jump over FY07 figures. However, BCCL had about Rs 1,100 crore of loans on its books in 2008 as debts.

Advertising sales made up over 80 per cent of the company's revenue. The Times of India, the flagship brand, grew 11 per cent, with average daily net sales up 5,00,000 from 2007 to almost 3,700,000. Most of this growth came from the east and the south.

The Economic Times, its business news daily, grew by a modest 6.7 per cent, with average daily net sales up by 1,00,000 to 7,75,000 copies. Mumbai Mirror's circulation grew by 16 per cent, to almost 7,00,000 copies.

The salary bill for 2008 increased marginally to over Rs 400 crore. The top three salaried employees - Vineet Jain, managing director, Times Group; Sameer Jain, vice-chairman, Times Group; and their mother Indu Jain, chairman, Times Group - each drew a whopping Rs 16 crore per annum in remuneration.