Zee Rises To Two-Month High After Brokerages See End To Pledging Crisis
The stake—amounting to 15.61 percent of the entire shareholding—was sold at Rs 304 per share on the National Stock Exchange
Zee Entertainment Enterprises Ltd.’s shares rose nearly 19 percent after 15 crore shares of the company changed hands in multiple large trades in pre-market trading.
The stake—amounting to 15.61 percent of the entire shareholding—was sold at Rs 304 per share on the National Stock Exchange, valuing the stake at Rs 4,560 crore.
While the buyers and sellers were not known immediately, the Subhash Chandra-led Essel Group, said it will sell 16.5 percent shareholding in the media major to financial investors. This is Essel Group’s second effort to raise funds to repay debts.
Shares of the media company jumped as much as 18.6 percent to Rs 364 apiece, an over two-month high.
CLSA termed yesterday’s development as the end of Zee's share pledging crisis. This significantly removes the risk of pledged shares held by the lenders hurting the stock price, said a Morgan Stanley report.
Brokerages View On Essel Group’s Stake Sale Plan
Morgan Stanley
- Overhang of pledged stake is diminishing.
- Large portion of promoter debt issue could be resolved with this recent stake sale.
- Investors will start monitoring financial and operational performance of the business.
IDFC Securities
- This development addresses all concerns pertaining to pledged shares getting sold in the open market.
- Zee promoters to continue to run the company.
- High likelihood of changes in the board composition after the promoters’ stake falls down to 5 percent.
- Market should start re-pricing the company for its strong fundamentals.
- Upside could come from addressing balance sheet issues such as higher group receivables, investments in exotic mutual funds over the next three to four quarters.
Dolat Capital
- Foresee the deal as positive as overhang of pledge and supply recedes and because of continuity of existing and efficient management.
- Balance sheet and cash flow improvement in Zee Entertainment would be the key to watch-out for.
- Since not all the loan against share will be repaid possibility of stake sale and/or merger of Dish is likely with Airtel DTH
Key Highlights Of Stake Sale Proposed Yesterday
- Essel Group to sell up to 16.5 percent stake In Zee Entertainment to financial investors.
- To repay loan obligations to certain lenders of the group for whose benefit such shares are currently encumbered.
- Essel Group seeks to sell 2.3 percent stake in Zee Entertainment to OFI Global China Fund and its affiliates.
- After the transaction, overall promoter holdings in Zee Entertainment will be 5 percent, out of which encumbered holdings of the group will reduce to 1.1 percent.
- Essel Group working actively on further divestments including its media/non-media assets.
Earlier this year, Essel Group sold up to 11 percent in Zee Entertainment to Invesco Oppenheimer Developing Markets Fund for Rs 4,224 crore. At the time, Invesco already owned 7.74 percent stake in Zee Entertainment.
Thereafter, the promoter held 22.37 percent stake in Zee Entertainment, according to September-end exchange data. Of that, 96 percent was encumbered with domestic mutual funds, financial institutions and foreign lenders. This includes the 10.7 percent stake pledged with Russian lender VTB.