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In the US and Europe, traditional media companies are under pressure from investors concerned about the disruptive power of the internet and online advertising.

“Old media” companies in India, however, are sweetly courted. US private equity firm Blackstone last week agreed to invest $275m in Ushodaya Enterprises, a leading newspaper and television owner and is also reported by local media to be in talks to invest a new venture with New Delhi Television, another major broadcaster.

Indian media companies’ attractiveness is a function of rapidly growing advertising revenue. With economic growth running at more than 8 per cent annually, rising consumer income has drawn marketers to newspapers and TV to plug their goods and services.

Ushodaya owns Eenadu, which is based in the Telugu-speaking state of Andhra Pradesh and is India’s third largest newspaper. The company also owns ETV Network, which with 12 regional language news and entertainment channels is the country’s fourth largest private broadcaster and the market leader in several major states. The Ramoji Group, Ushodaya’s parent, also owns Ramoji Film City, Asia’s largest studio complex.

“There’s been a sudden increase in the consumption potential of the Indian market,” said Siddhartha Mukherjee of TAM Media Research. “If a marketer – whether a telecom operator or auto manufacturer or pharmaceutical company – has not made itself visible with the help of media, they are losing out.”

Total industry ad revenue grew to about $3.5bn (Rs163bn) last year from $2.8bn in 2005, with print and television accounting for 48 per cent and 40 per cent, respectively, according to TAM Media Research. The internet accounted for only 1 per cent.

Television channels in India have exploded from a mere two prior to 1991 market reforms to more than 340 today, with some 40 news channels alone. India also has a voracious appetite for local and English language newspapers and magazines.

Blackstone’s undisclosed stake gives it a seat on Ushodaya’s board. The deal is the second and largest to date for the group’s $1bn India fund.

Foreign investment in Indian newspapers and TV production companies is capped by the government at 26 per cent. The Secur­ities and Exchange Board of India last week rejected a request by Ireland’s Independent News & Media to expand its 20 per cent interest in Jagran Prakashan, India’s biggest regional newspaper publisher, without making a wider tender offer after its maximum stake was diluted by the publisher’s initial public offering last year.

A slew of other Indian media and entertainment companies are also queuing up for local IPOs. According to Delhi-based research firm Prime Database, 18 media companies are expected to raise more than $650m in forthcoming flotations. Global Broadcast News, owner of 24-hour news channel CNN-IBN, last month opened subscriptions for its $22m offering.

“Slowly and steadily the mindset about media has changed. It is now coming under the attention radar of investors,” said Mr Mukherjee.

Blackstone believes rising levels of personal consumption in India will spur advertising growth. Akhil Gupta, chairman of Blackstone Advisors India, highlighted Ushodaya’s “deep cultural understanding of the markets and truly regional content.”

Ushodaya had considered an IPO but decided to go with Blackstone in order to leverage the group’s “track record in the global media sector,” said Ramoji Rao, its chairman.

Additional reporting by Joe Leahy

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