Viacom18, a controlled subsidiary of TV18, is now the owner of the JioCinema OTT platform and has over Rs 15,000 crore in its kitty to disrupt the market with. What’s more, it has a new, seasoned, team at the top, Uday Shankar (former President Walt Disney, APAC) and James Murdoch (former CEO, Century Fox), which can help it do just that. The access to Paramount’s library also continues as the former ViacomCBS remains a stakeholder in the new entity. This is all good news, but much of this was expected after April 27 last year when the deal was announced. What has changed is more significant.

The new deal
As per the deal announced last year, Bodhi Tree Systems (a platform of Murdoch and Shankar with Qatar Investment Authority as an investor) was to bring in Rs 13,500 crore and Reliance another Rs 1,645 crore to total up to a sum of Rs 15,145 crore ($2 billion). That’s changed. Reliance will now bring in the bulk, with a contribution of Rs 10,839 crore, while Bodhi Tree Systems will infuse Rs 4,306 crore.

Why the change?
That’s the big question. The shift suggests that Reliance is loathe to dilute its stake in Viacom18 in a rush. And the recent strong showing by JioCinema could be behind this. Not just has the OTT app bagged rights for marquee events like FIFA World Cup and the IPL, but its traction has been remarkable.

Already Jio Cinemas is setting new benchmarks in digital viewership. After the successful coverage of the FIFA World Cup, that saw 32 million viewers tune in for the final, JioCinema has now surpassed the entire digital viewership of IPL during the last season in just the first weekend of the current season. In its release, Viacom18 says: “The platform set several new records with 2.5 crore+ app downloads in a single day, 147 crore video views on the opening weekend and a peak concurrency of 1.6 crore for the first match”.
And if the digital explosion continues, JioCinema can clearly hope to capitalize on this. Viacom18 is already emerging as one of the largest TV and digital streaming companies in India, and strong growth can spell more valuation upside going forward. Clearly, Reliance seems to be betting on this.

The valuation rub-off
The other interesting aspect of the deal is the valuation. While this has not been spelt out, a rough, back-of-the-envelope computation based on Bodhi Tree System’s contribution and stake throws up a number close to Rs 33,000 crore. Of this, the valuation attributable to JioCinema works out to a little over Rs 9,000 crore. This would imply that TV18 by virtue of its 13.5% fully diluted stake could be ascribed a share of Rs 4,450 crore of the value.

The above valuation should be seen in context of TV18’s total market capitalization today of just over Rs 5,000 crore. Similarly, half the above valuation can be ascribed to Network18, which owns 51% in TV18. What this suggests is that the residual business of TV18 is today valued at just about Rs 700 crore, after subtracting the value of Viacom18.

While this math is suggestive, it is best for investors to weigh several factors before making any investment destinations. As valuations, especially in private deals, are based on the judgements of those involved in a transaction.