Entertainment industry veteran Pradeep Guha (in pic) is working on a recast plan for the troubled INX Media Pvt Ltd, which broadcasts general entertainment channel 9X and music channel 9XM. The recast plan will be presented to its private equity investors, notably New Silk Route (NSR), in the next three to four weeks.

Guha, a former top honcho at the Times Group and Zee Entertainment, would assume the role of Chief Executive, with a small equity stake, if the revamp bid is approved by NSR investment committee, said sources privy to the developments. NSR will then infuse another round of growth capital into the media company, which has been on the lookout for funds since late 2008.

With this investment, NSR could emerge as a controlling shareholder through "down round financing" where an investor picks up stock at substantially lower valuation (when the founders' shares are valued much less or worth nothing at all. Down-rounds are frequent when a booming economy turns bad).

NSR has been active in managing INX where it along with Temasek, New Vernon, Kotak Private Equity and SREI invested $170 million in February 2007. Guha was hired as a consultant after Indrani and Peter Mukerjea, original promoters of INX, resigned from their management positions last year.

"There is a launch plan on the cards. A presentation is being made to some of the investors who will decide on fresh round of equity financing," said a source, who did not wish to be identified. "The alternative is peddling the asset for an outright sale," he added. INX is the story of a boom time start-up, turbocharged by private equity investors, turning bad.

“The existing investors, advised and assisted by Mr. Guha, are evaluating various options to build and extend the clear market leadership position that 9XM enjoys in the TV music genre," said an NSR official in emailed response to VCCircle's queries. "At this time, it would be premature to disclose the specifics of those plans. The Company will make announcements at the appropriate time,” the statement added. INX Media officials were not available for comments.

INX shareholding will see significant changes if the recast plan goes through. The latest available data suggests the private equity funds hold 50% stake while employees have 5% and the original promoters (Mukerjeas) retain 45%. "There is varying level of investor appetite, and there is reasonable probability that not many barring the likes of NSR are likely to bring in fresh funds. To that extent, the shareholding will be skewed to any investor bringing fresh equity which is typical of down-rounds," explained the source.

INX has seen significant erosion of shareholder value in the last two years due to mounting losses. VCCircle learns that the company suffered losses of Rs 446 crore with an income of Rs 132 crore in FY09. Currently, NSR holds a 20% stake in INX while Singapore's Temasek has 19.9%. Kotak and New Vernon PE together hold another 10% stake.

While 9XM is the number one music channel in the country, its GEC sibling hasn't fared well. The GEC space is currently dominated by three players - Colors of Viacom 18 Media Private Ltd, Star Plus of Star India Pvt. Ltd and Zee TV of Zee Entertainment Enterprises Ltd.  INX has already sold off the news channel INX News to Vinay Chhajlani, the promoter of Indore-based regional dailies Naidunia and Nav Dunia.

Meanwhile, a few sectoral analysts remain sceptical on the recast move at INX. "It is not even in the reckoning in the GEC space where Colors, the current leader, is losing cash after heavy investments. While 9XM can claim leadership in music, this space is not a money spinner like GEC," explained an media watcher, with interests in the sector.

On his part, Guha, is some sort of a turnaround artist having pulled Zee out of the lurch in recent years. Prior to that, he was a part of the Times Group for nearly 25 years. At the helm of Zee Entertainment, he played a role in recovering the lost ground for the flagship GEC channel, before quitting the post of CEO 18 months back. Media reports, at that time, had suggested that he would go entrepreneurial. He had launched an outdoor entertainment business called The Street Culture. Guha is also a venture advisor with Nexus Venture Partners, a Mumbai-based venture capital firm with $320 million under management.

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