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Exclusive: Ad-for-equity investor HT Media partially exits Koovs

23 December, 2016

Delhi-based HT Media Ltd, which made an ad-for-equity investment in Koovs Plc—parent of Indian lifestyle e-commerce venture Koovs.com—early this year, has made a quick partial exit taking advantage of the surge in the share price.

The media house has sold 10% of its holding in Koovs Plc, a firm listed on London Stock Exchange’s junior market AIM, a top company executive told VCCircle.

Piyush Gupta, chief financial officer at HT Media, said that the company “exited 10% of our holding in the market last month and (is) not intending to exit anymore at all”.

HT Media’s chief strategy officer Sandeep Jain had told analysts after quarterly results last month that the publisher of Hindustan Times and Mint newspapers was planning to sell shares of Koovs.

The decision to sell shares in Koovs was unusual as it came just months after HT Media invested £3 million ($4.4 million or around Rs 29 crore then) in the firm. After a fresh issue of shares to other investors thereafter, HT Media held a 6.84% stake in the company.

The media company had purchased 12 million shares at 25 pence each as part of a larger round. It was the first significant transaction related to a local e-commerce venture after the government formally allowed foreign direct investment in online marketplaces.

While preferential allotment regulations for listed firms in India mandate a one-year lock-in period, AIM-listed companies have relaxed governance norms.

Koovs’ shares have rocketed since the fresh funding. In November, its share price ranged between 50 pence and 63 pence each.

This means HT Media doubled the value of its investment in a short span of time and pulled out around Rs 5 crore from Koovs. Its remaining stake is now worth around Rs 42 crore.

Gupta said that HT Media has no “near-terms plans” to sell more stake in Koovs. “On the contrary, we have a huge belief in the long-term investment prospect,” he said.

He added that the firm wanted to test liquidity in the Koovs stock by selling a small portion of its stake in Koovs, which has since been done.

HT Media’s decision to offload its stake in Koovs comes close on the heels of an investment by its rival Times Group—the publisher of The Times of India and The Economic Times. Koovs had raised £10.9 million, which included £3.9 million from the Times of India Group and £7 million from other investors, in November. The Times of India Group holds a 4.4% stake in Koovs.

Ad-for-equity investors such as HT Media and Times of India Group use advertisement space in their publications as a currency to pick up a stake in consumer-facing firms.

Meanwhile, Koovs’ shares has fallen 10% since Tuesday, after announcing a significant loss for the six months ended 30 September.

The loss for the period was £9.1 million after investing in marketing and technology. The site did see sales growing 114% to £7.9 million, up from £3.7 million the year before. Koovs Plc now has a registered user base of 1.5 million.

Koovs India was established in May 2010 by Rajesh Kamra, Manish Tewari, Kanishk Shukla and Amit Shukla as a general e-commerce business. In August 2011, Infotel e-Commerce Pvt. Ltd, a company controlled by Anant Nahata, acquired a controlling interest in Koovs India.

The company initially focused on the sale of mobile phones and other electronic goods. It later pivoted to become an e-tailer of fashion apparel and accessories. It now offers a mix of private label and branded merchandise.

The e-shopping venture Koovs.com is run by another firm, Marble E-retail Pvt Ltd, under licence from Koovs India. Koovs India is a subsidiary of Koovs Plc. The legal structuring was created to comply with FDI norms in e-commerce sector.

Koovs competes with the likes of Flipkart-owned Myntra and Jabong, besides several other horizontal and vertical e-commerce players in the booming market for online retailing of fashion apparel and accessories.

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Exclusive: Ad-for-equity investor HT Media partially exits Koovs

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