TenCent To Invest $7.5M In MIH India Over 3 Years; Can Acquire Upto 50 Pc Stake

MIH India Global Internet, the holding company for Indian Internet properties like ibibo.com, dwaar.com, onefamily.com, Newscola.com and bixee.com, and ad network AdWinks, has entered into an agreement to divest as much as 50 percent stake (less one share) to China based Tencent Holdings. Tencent, in turn, will invest at least $7.5 Million in MIH India over a period of three years, though it has the option of increasing that investment if needed. There are some conditions (of assuming certain loans) under which Tencent can increase its holding to 50 percent shareholding (minus one share).

Burn Rate: Take a look at the losses that MIH has suffered since launch:

Assuming that MIH started operations around August 2006, they’ve suffered a net loss of $18.947 Million in 23 months – an average loss of $1.114 Million (Rs. 4.76 Crores) per month. Some of that money has been spent on acquiring a 30 percent stake in ACL Wireless for $12.3 Million in July 2007, acquiring Bixee and Pixrat (for websites and a team of developers in Bangalore), developing products, allowing users to call each other for free, payouts to users as prizes, sponsoring TV shows like ibibo MTV Superstar and ibibo FTV Fashion Photographer.

Internal company transaction? This may be considered to be an internal company transaction, since the parent company of MIH India – Naspers, owns a 35.5 percent stake in TenCent. Interestingly, I’d heard murmurs of TenCent being in talks with MIH India around a year ago, but wasn’t able to verify. The deal didn’t appear to mean much then, since both are a part of Naspers portfolio.

More on valuation, Tencent’s agenda, and probable launches –

Valuation: Two numbers are specifically mentioned: a $7.5 million investment, and a 50 percent stake. Some executives (update: industry reports as well) are implying that this indicates that MIH India is valued at as $15 million. One can’t comment on the valuation unless we know how much stake is being picked up for $7.5 million.

What’s in it for Tencent?: As per the filing, this deal is a part of a long term strategy from TenCent, to take strategic stakes companies in Asia. Tencent believes that India as a market is similar to China. Indirectly, this will also give Tencent a stake in mobile value added services company ACL Wireless, in which MIH India has a 30 percent stake.

Products Perhaps gaming might get a boost – with the QQ gaming portal. TenCent is also known for its multi-platform (mobile and Internet) instant messenger QQ, as well as mobile chat, Interactive Voice Response services.

Download the document (pdf) Tencent filed with the Hong Kong Stock Exchange

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