With merger consummated, Jio Cinema, Viacom18 seeking to create OTT behemoth!

What's Buzzing? 

Viacom18 has announced that following the sanction by NCLT Mumbai, the scheme of merger of Reliance Storage (RIL subsidiary which houses Jio Cinema) with itself has become effective and Viacom18 has allotted shares to Bodhi Tree Systems [a platform of James Murdoch’s Lupa Systems and Uday Shankar with Qatar Investment Authority (QIA) as investor], and RIL group entities as consideration for the scheme of merger. 

Context 

On consummation of this merger, (i) the integration of JioCinema into Viacom18 has been completed; and (ii) Viacom18 has access to Rs 15,145 crore of cash for its planned growth, comprising Rs 10,839 crore contributed by RIL group entities and Rs 4,306 crore contributed by Bodhi Tree Systems. The shareholding on the fully diluted basis will be as following: RIL group entities – 60.37%; TV18 – 13.54%; Bodhi Tree – 13.08%; Paramount Global (erstwhile Viacom CBS) – 13.01%. We highlight that this deal implies valuations of Rs 32920 crore for the combined entity. Also, considering Reliance group entities contribution, Jio Cinema valuation comes to ~Rs 9035 crore. We highlight that Viacom 18 (through Jio Cinema) is seeking a become a major destination for entertainment and sports viewing on digital platform in India and has digital rights of major properties such as IPL, NBA and the last football World Cup. 

Our View 

We believe that with access to ~Rs 15000+ crore of cash, the combined entity will continue to drive their sports OTT leadership foray displacing the leader Disney Hotstar. Furthermore, Jio Studios has recently unveiled a slate of 100+ movies and web shows in multiple languages and genres to be released over the next 18-24 months on Jio Cinema streaming app. The content studio has spent Rs 2,000 crore on producing content in the last two years. With access to over ~43+ crore digital subscribers of Reliance Jio, access of cash and strong content slate, we believe Reliance can leverage the same to attain its ambition to create an OTT giant, going ahead.