Details of plan not final, but limited scope for yet more leverage.

Dish TV, the country's largest direct-to-home television company, is reaching out to private equity and institutional investors for a fresh round of fund raising, which could turn out to be the highest in the sector.

Dish is believed to have appointed investment banks UBS and Macquarie to help raise around Rs 1,000 crore ($200 million) of equity to fund expansion and investment in upgrading technology, said sources. The final structure is unclear, as is the extent that existing shareholders would dilute stake, as preliminary talks have just begun. The promoters, the Zee Group's Subash Chandra Goel and his family, hold close to 65 per cent stake in the company. Analysts feel a significant dilution is unlikely. "We have got the necessary approval from the Foreign Investment Promotion Board but we haven't decided on the amount, time frame and how the money will be raised," said R C Venkateish, chief executive

The DTH sector has a foreign holding cap at 49 per cent. In Dish, the foreign investment is 27 per cent. DTH is a system of receiving TV programmes from satellite within homes through personal dish antennas, bypassing cable operators. India is set to become the largest DTH market in the world in terms of subscribers next year, overtaking America, according to a study by Media Partners Asia.(Click here for table & graph)

Earlier round
Two years earlier, Dish TV issued fresh shares for a round of fund raising from PE investors. New York-based asset management firm Apollo Management picked up an 11 per cent stake for $100 mn (Rs 465 crore) after the company raised money through global depository receipts. Sources said it was unlikely Apollo would look at an exit, for despite the stock dropping a little over 10 per cent in the past month, its two-year investment in the company was making money. Apollo's investments were done at Rs 39.85/share. On Thursday, the stock closed at Rs 64.60 on the Bombay Stock Exchange.

Dish's attempts to win subscribers in a crowded market have stretched its balance sheet and left the company highly leveraged. DTH companies bear part of the cost of equipment sold to a new consumer. This is to attract customers, with the expectation that they'd pay back and generate more money over time through monthly subscription fees.

Dish has a gross subscriber base of 12 mn, with around 30 per cent market share in a six-player market. But quarterly losses are rising. During the July-September quarter, Dish recorded a 48 per cent jump in revenue to Rs 482 crore, compared to Rs 326 crore in the corresponding quarter last year. However, there was a net loss of Rs 48.6 crore, against Rs 45.2 crore in the same period last year. The company also added 577,000 subscribers in the quarter.

Investment, growth
"India's DTH market has seen a scorching pace of growth in subscriber additions, with six players. This has resulted in hyper competition and low average revenue per user (Arpu). As the sector is very capital-intensive and requires continuous investments for new technology like high-definition, the companies will have to look at raising additional capital," said the head of a rival company.

Dish recently raised prices. According to estimates by Emkay Global, a rise of six per cent on the base pack that close to 45 per cent of the customers subscribe to should improve its revenue. Dish intends to end this financial year with an Arpu of Rs 160-165.

Investors to the company will count on the growth numbers for the DTH segment. "The combined strength of Dish, Tata Sky, Sun Direct, Reliance Big, Airtel Digital and Videocon D2H should overtake the US' Direct TV and Dish Network, translating into a 20 per cent lead over the American DTH market of 35 million users next year," said the Media Partners Asia study.