US-based private equity firm Warburg Pincus, which had completely exited from Bharti Airtel in 2005, returned to the company on Tuesday by buying a 20% stake in the telecom major’s direct-to-home arm Bharti Telemedia for $350 million. Under the deal, Bharti Airtel will sell 15% stake in Bharti Telemedia, while the remaining 5% will be sold by another Bharti entity, the company said in a statement. Viraj Sawhney, managing director of Warburg Pincus India, will join Bharti Telemedia’s board as part of the deal. Once the deal closes, Bharti Airtel will own 80% stake in the DTH unit. Warburg Pincus was among the earliest investors in Bharti. Between 1999 and 2001 it had invested $292 million in Bharti Tele-Ventures (as the company was called then) for a 19% stake. Bharti was then valued at $1.5 billion. When Bharti went public in January 2002, Warburg’s stake came down to 15%. Subsequently, in 2004-2005, Warburg sold 3.35% stake in the company for about $208 million. Bharti was then valued at $6.21 billion.
In March 2005, Warburg sold another 6% stake in Bharti for $560 million when the company was valued at $9.3 billion. The same year in October Warburg sold its final 5.65% stake to Vodafone for $847.5 million. The company’s valuation at that time was $15 billion, which was 10 times when Warburg had invested five years ago, thus making Warburg’s total realisation at $1.6 billion, which was over 5.5 times its investment amount.
Bharti Telemedia operates under the brand Airtel TV and has about 14 million subscribers and a revenue of about $550 million in the 12-month period ended September 30. “Airtel TV is very well positioned in the DTH space, and we are committed to grow our share of the market through a combination of innovation, value engineering, customer service and distribution initiatives,” Gopal Vittal, MD and CEO, India and South Asia, Bharti Airtel, said.
“The Indian digital TV market is expanding rapidly and we believe that Airtel DTH is well positioned to capitalise on incremental growth in digitisation and new TV penetration in Tier 3 and 4 towns and rural areas,” Vishal Mahadevia, MD and co-head, Warburg Pincus India, said.