Nimbus' Harish Thawani Takes the Powerplay
Image: Vikas Khot
arish Thawani is the outsider in the Indian broadcasting industry. He takes crazy bets, shoots his mouth off, takes on the government and doesn’t hesitate to take one of the world’s largest media companies to court. What’s more, he has managed to land on his feet after every one of these battles. So far.
Thawani wants to list his Nimbus Communications on the bourses. The company owns the Neo Cricket and Neo Sports channels, Nimbus Sport his sports marketing agency and cricketnirvana.com, his cricket Web site. Nimbus filed its draft red herring prospectus with the Securities and Exchange Board of India (Sebi) in September last year and has been responding to clarifications since.
The IPO is very important for Thawani. The money he expects to raise will propel him to the next level in the broadcasting and sports business. This is his chance to join the league that Sony, Zee and Star are a part of. And it will also let him continue as a broadcaster in case he ever loses TV rights for cricket matches in India.
Thawani is moving beyond cricket in his next avatar. He’s announced plans to launch a movie channel, Neo Cinema and a lifestyle channel, Neo Zindagi. He’s launching World Series Hockey, a domestic hockey league based on the IPL format. He’s also betting big on golf. All these moves are a hedge against cricket.
Trouble in the Air
Launching the channels has been on his mind at least since 2008. But he didn’t have the money for that. Nimbus kept racking up losses since 2006. According to its draft red herring prospectus, Nimbus clocked a loss of Rs. 142 crore at the end of March 2010. The company has to repay a loan of Rs. 225 crore to Punjab National Bank (PNB). It also has unsecured loans of Rs. 247 crore as on March 31, 2010. Investors like Americorp Ventures, CSI BD and Funderburk Enterprises want an exit route.
This could be construed as the last throw of dice of a desperate gambler. “That is an unfair statement to make. Thawani has the best brains in the sports business,” says a former Zee employee.
Not everyone is convinced though. “I have my doubts about Neo,” says an industry analyst. “I don’t think it can be turned around. Thawani is up to his neck in debt,” he says. But then he adds in the same breath, “You don’t really know with him. He can’t be written off.”
Thawani could have sold a stake to Sony in 2007. It had offered Rs. 315 crore for 26 percent in Neo Cricket, India’s number one sports channel and the crown jewel of Nimbus. The Nimbus board declined that offer. Now, with the IPO, the company hopes to raise around the same amount by diluting 30 percent stake.
But Thawani’s decision to look beyond cricket isn’t exactly surprising. In 2006, he bid Rs. 2,700 crore ($612 million) and won BCCI rights in India from 2006 to 2010. Cricket valuations went through the roof after that. ESPN-Star paid Rs. 4,600 crore for all International Cricket Council matches from 2007-2015. Multi Screen Media (MSM) paid Rs. 8,200 crore for rights to the IPL for nine years in 2009.
The bid for BCCI rights was an audacious gamble even then. While the other rival sports channels had deep pockets to take initial losses (they had the backing of large media conglomerates — ESPN had Rupert Murdoch and MSM had Sony), Thawani had to use all his chutzpah to hawk the large ad inventory for his fledgling channels to clients. By 2007, he tied up close to Rs. 300 crore of ad revenue. It was good going, but not quite good enough.
In October 2009, BCCI renewed its deal with Nimbus for its matches until 2014 for Rs. 2,000 crore. If the BCCI had given the rights to someone else, Nimbus and Thawani would have been left with two sports channels and very little content to play on them.
It was Thawani’s outrageous 2006 bid that saved him in 2009. When the time came to renew the deal, ESPN-Star and MSM couldn’t commit huge amounts for another property. But ESPN-Star’s ICC deal runs out in 2015 and if they decide to bid for BCCI rights in 2014, Thawani will have to get into a bidding war. Looking at his financials, it doesn’t seem like he can afford one.
Thawani has spent a lot of time and money building Neo Cricket. When he won the BCCI rights in 2006, Nimbus wasn’t a broadcaster. It was a production house and a sports marketing agency. “Nimbus was an asset owner. It used to manage rights,” says Anil Ahuja, head of 3i Group in Asia that has a little more than 30 percent stake in Nimbus. “When we invested, we never imagined that it would transform itself into a broadcaster,” he says. Nimbus launched Neo Cricket, for cricket, and Neo Sports, for other sports, in late 2006.
Nimbus’ competitors did not expect the transformation either. When the bidders for the BCCI rights were announced, Himanshu Mody, then the business head of Zee Sports, walked out of the room, says a source who was present during the process. “Zee and Nimbus used to share a close working relationship back then,” says a former Nimbus employee. “Mody had no idea that Harish was bidding for the rights and when Harish’s name was announced, he knew no one else was going to win it. No one knows the sports business in India like Harish,” he says. The two groups haven’t done business together since.