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o3 Capital launches media fund worth $300m

Mumbai's o3 Capital Advisors and Balu Nayar, a former regional director of Yahoo!, have launched a private equity fund where LPs commit media value, not capital.

o3 Capital Advisors, a boutique investment bank, has launched Morpheus Media Fund, a cash-neutral media equity fund that will take stakes in companies in exchange for advertising space or time in newspapers, magazines, the internet, radio, television and outdoor media.

The fund has been launched in partnership with Balu Nayar, former managing director of IMG India, a sports management company, before which he was based in Singapore as a regional director at internet services company Yahoo!.

Nayar heads the Morpheus Media Fund.

Morpheus is a ‘media equity’ fund, one that has media owners as limited partners, who invest in the fund by contributing advertising space via their respective media outlets. “In return for media value that they contribute, they get units in the fund,” Nayar told PEO. Media value contributed takes the form of “time on a television channel, space in print publications, time on radio channels or space in outdoor media. This is used to invest in companies,” he said.

o3 Capital is targeting commitments of media value worth $300 million.

Nayar said that investments made by the fund will also be cash-neutral. The fund will look for companies that require marketing for their growth, and will then provide them with advertising space and time in exchange for a stake.

“The idea is to provide investee firms with media value in return for equity stakes,” he said.

Once investments are made, the fund will exit companies following the holding period, to secure cash returns through commonly employed means such as IPOs or trade sales.

Nayar said: “The Morpheus Media Fund allows media outlets an opportunity to increase sales and ride the Indian growth story. It gives them additional revenue even when the economic cycle is down.” He added that there is room for growth in the advertising sector in India, which has an advertising to GDP ratio of 0.34 percent – amongst the lowest in the world – while the global average is more than 1 percent.

The fund will invest in companies that take advantage of India’s consumption boom. Sectors targeted are real estate, retail, FMCG, consumer services, financial services, education and telecom-related companies.

The fund is seeking a first close in three months, and a final close six months after.

Fundraising has begun and it according to Nayar, the fund has already signed up a large media network and is in advanced stages of talks with three television networks, two outdoor media players and a number of print media publications. In total, it is seeking about 15 large media players to invest in the fund.

Morpheus will invest in about 30 to 35 companies.

o3 Capital will also raise a cash fund to make co-investments alongside the media equity fund. The cash fund will invest in select investee companies and fundraising for it will begin shortly, Nayar said.

o3 Capital has offices in Mumbai, Bangalore and New York.

In his time at IMG, Balu Nayar worked on the conceptualisation, business modelling and monetisation of the Indian Premier League, a hugely successful cricket tournament that was launched earlier this year.