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Nimbus' Harish Thawani Takes the Powerplay

The maverick entrepreneur is looking at an IPO to propel him to the next level in the broadcasting and sports business. But first he needs to get out of the woods

Published: Apr 13, 2011 06:11:47 AM IST
Updated: Apr 12, 2011 04:12:16 PM IST
Nimbus' Harish Thawani Takes the Powerplay
Image: Vikas Khot
Harish Thawani, Founder & Chairman, Nimbus Communications

Harish 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, 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.

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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.

Nimbus' Harish Thawani Takes the Powerplay
Image: Arko Datta/Reuters.jpg
EARLY DAYS Anil Kumble(centre), Yuvraj Singh(left) and Sourav Ganguly(right) celebrate a wicket during the India-Pakistan series in 2007. Nimbus had to share feed with Doordarshan

It’s a common line about Thawani: That he has the best brains in the business. But the next line is always “You have to be careful when dealing with him”. The former Zee employee says, “He’s a visionary. But he’s also very good at manipulating legal loopholes.” One decision he couldn’t manipulate was the one by Information and Broadcasting Minister Priya Ranjan Dasmunsi.

The year 2006 should have been the start of Nimbus’ fairy tale. Thawani had tied up with Star India for the distribution of  his channels. “Star would have paid him Rs. 24 crore a month so that they could carry his channels. And he would retain advertising,” says the ex-employee. Other reports say the deal was worth Rs. 1,000 crore for four years. That money would have taken care of almost 40 percent of the BCCI payment.

But Dasmunsi mandated that Nimbus would have to share its live feeds with Doordarshan (DD) for all matches of national interest. And the government would decide what matches would be of national interest. Suddenly Nimbus’ rights weren’t that lucrative. Subscribers could get cricket for free on DD. Star cancelled the contract. Thawani went to court. They settled out of court. Industry sources say that Star settled for Rs. 135 crore, the largest out of court settlement in Indian media. But that’s pittance compared to the contract. The BCCI agreed to reduce $55 million from the original $612 million for loss of revenue. But the damage had been done.

Nimbus next tied up with Sony’s One Alliance for distribution in late 2007. The partnership continues as of  today.  

Another Chance
People inside the company say matters are turning around financially. A source familiar with the finances says that the company has turned in profits since March 2010. Earnings before interest, tax, depreciation and amortisation should be between Rs. 350 crore and Rs. 390 crore, says the source. The two sports channels should turn in Rs. 200 crore while Nimbus Sport should come up with Rs. 100 crore. Subscription revenues make up the rest. Thawani and Ahuja refused to comment on the figures.

Thawani says that there are no outstanding loans left to pay off. What about the shares he had pledged to PNB? “There are no promoter shares pledged to any bank or any other entity. They have been paid off from the company’s cash flows and revenue collections,” he says. From a loss of Rs. 142 crore to a profit of Rs. 350 crore and all the loans paid off? It sounds far-fetched. But if anyone can pull a rabbit out of this hat, it would be Thawani.

Thawani’s trying to show the world that Nimbus is not a one man show anymore. His succession plan is in place. He says, “I have already been succeeded in day to day operations.” Yannick Colaco is COO of Nimbus Sport. Prasanna Krishnan is COO of Neo, the broadcasting business. Manoj Agarwal is charting the growth of the new media business and the international side is mentored and guided by Digvijay Singh.

That’s all okay, but will it work? Ahuja from 3i tries to explain the broadcasting business: “Broadcasting is a very simple business model. Assume revenue on the Y axis and time on X axis. Two lines for revenue: Subscriptions and advertising. Subscription grows at a 30-45 degree angle and translates into more advertising.”

And Neo Cricket has some big advertisers. Hero Honda, Bharti, HDFC all regularly sponsor series on Neo Cricket. And it’s in no small measure thanks to Thawani. It’s because of his personal equation with these companies that they keep coming back.

While other investors are looking for a way out, 3i is staying put. “Why are we staying put? Why will any investor stay put? Look at ESPN. Would they have dreamed that a Nimbus would exist? Nimbus today has got a wider reach than ESPN,” says Ahuja.

IPL: Lost and Found
Nimbus has won the global rights for Internet, mobile and radio for the IPL in a consortium with the Times of India Group. The Times Group is an investor in Nimbus via its private treaties agreement. Ah! The IPL. Rumour has it that the IPL is Thawani’s brainchild. Is it true?

“I can confirm to you that around June 2006, Nimbus, largely led by Yannick Colaco and I, presented a detailed plan for revolutionising cricket in India through an evolution of a T20 club league which was presented by us to BCCI in London,” says Thawani.  

Surely he could have bid for the IPL rights? Look at the beast it has turned into. “We didn’t bid for two reasons. We were very concerned about the IPL ecosystem at the outset. As a company we will distance ourselves from any ecosystem that encourages facilitation fees, backhands and other forms of crony capitalism,” says Thawani.

“Harish was so pissed off at the IPL. He was there at the stadium at the inaugural game in Bangalore in 2008. He left halfway,” says the ex-employee.

It’s different this season though. As the cameras pan across the stadiums this IPL, keep a lookout for a guy with a shaved head in a suit networking with biggies in the rarified environs of the corporate boxes. Thawani could well be negotiating his next big deal.

“Look at ESPN. Would they have dreamed that a Nimbus would exist? Nimbus today has got a wider reach than ESPN”

(This story appears in the 22 April, 2011 issue of Forbes India. To visit our Archives, click here.)