Zee Promoters Say Reached Understanding With Lenders On Pledged Shares
Subhash Chandra’s Essel Group said it reached an understanding with lenders having a pledge on Zee Group promoters’ stake that a steep decline in the shares of group companies will not lead to a default.
The management of Essel Group said in a statement on Sunday that it met heads of non-bank lenders, chief investment officers of mutual funds and bank representatives to allay concerns after shares of group entities tumbled, eroding Rs 14,000 crore in market value on Friday. That came after a report said that the Essel Group’s name emerged in a probe linked to large deposits made after demonetisation.
The lenders, according to the statement, showcased their belief in the intrinsic value of flagship Zee Entertainment Enterprises Ltd. and Dish TV Ltd., resulting into the following aspects:
- There will not be any event of default declared due to the steep fall in price.
- There will be synergy and cooperation among lenders leading to a unified approach.
- Lenders drew comfort from reiteration by the promoters for a speedy resolution through a strategic sale in a time-bound manner.
The mutual fund industry has a total exposure of around Rs 7,500 crore to Essel group’s NCDs, which has Zee Group’s shares pledged as collateral. The total loan against pledged shares to mutual funds, non-bank financial companies and banks stood around Rs 13,500 crore, a senior executive at a fund house, who was part of the meeting with the management on Sunday, said requesting anonymity.
The shares of group companies plunged at least 19 percent after news website the Wire reported that the Serious Fraud Investigation Office is probing a company—Nityank Infrapower (formerly Dreamline Manpower)—for deposits of over Rs 3,000 crore made just after Prime Minister Narendra Modi outlawed old Rs 500 and Rs 1,000 notes in November 2016. Its investigation showed that Nityank Infrapower and a group of alleged shell firms had carried out financial transactions that involved a few firms associated with the Essel Group of Subhash Chandra between 2015 and 2017, according to the report.
The Essel Group denied any links and clarified that Nityank Infrapower and Multiventures Ltd. is an independent company and does not belong to the group. It said that all queries relating to demonetisation from the SFIO were directed to Nityank and that all the information and documents relating to certain transactions sought by the agency were provided.