India's Tata Opportunities Fund is to buy a 5% stake in direct-to-home (DTH) TV operator Tata Sky for INR2.75 billion (US$49.9 million), according to the Times of India.
Tata Sky is currently 60% owned by Tata Group, while joint venture partner Rupert Murdoch's Star holds a 30% stake. Singapore's sovereign investment fund Temasek bought the remaining 10% in 2007 through Bay Tree Investments.
Tata Opportunities will be issued new shares, with the existing partners' stake holding now being diluted, according to the report. The fund raised a reported $600 million last month from sovereign investors, financial institutions, global corporates and high net-worth families.
In January, the Wall Street Journal, owned by Murdoch's News Corporation, reported that Tata Sky is soon to file an initial public offering (IPO) to raise INR25 billion, with Kotak Mahindra Capital, Morgan Stanley and Citigroup managing the offering.
The operator – one of six private DTH platforms in India – has 10.4 million subscribers and a 19% market share, according to researchers Media Partners Asia (MPA).
Tata Sky is not alone in seeking extra funds. Bharat Business Channel, which runs the DTH division of the Videocon Group, is soon to launch an INR7 billion IPO, while Bharti Airtel's DTH arm Airtel Digital TV is engaged in discussions with private equity companies KKR, Carlyle and Bain Capital to sell a 20% stake in its DTH business.
MPA estimates that India's DTH players accumulated $1.5 billion last year, with revenues expected to treble to over $5 billion by 2020, thanks largely to the mandatory digitisation of India's cable TV networks.