Hope floats for Essel Group, may get more time to repay Rs 7,000 crore debt

Subhash Chandra-led group is fighting to avert a crisis as selling pressure on the Zee stock continues

With less than a week to go before the deadline to repay Rs 7,000 crore comes up, Subhash Chandra-led Essel Group’s senior executives said the majority of lenders had agreed to extend the timeline to March 2020. The company will hold a formal meeting with mutual fund houses and other lenders in the next couple of days to finalise the modalities of the extension. Group executives said they had received a positive response from the lenders after they paid off Rs 4,450 crore since the crisis broke early this year.

On Tuesday, shares of Zee Entertainment Enterprises (ZEEL) saw a lot of action, with over 62 million changing hands on the two exchanges. Market sources said there was selling pressure on the stock following news that ICICI Prudential Mutual Fund and some other non-banking financial institutions with small exposures had pressed the sell button fearing repayment delays. When contacted, the ICICI Prudential spokesperson declined to comment. 

ICICI Prudential Mutual Fund has an exposure of Rs 365 crore to the company.  

The ZEEL stock had taken a 10 per cent knock on Monday after SBI Mutual Fund sold pledged shares worth Rs 200 crore. Last Friday, Kotak Mutual Fund exited the stock. After the exit by these fund houses, Chandra’s shareholding in ZEEL has come down from 24.8 per cent to 24 per cent, said sources in the know. The majority of this stake is pledged.

The stock closed at Rs 279.30, up 2.65 per cent, on the BSE on Tuesday. Market players said buyers emerged to lap up the stock at prices below Rs 270. The stock opened at Rs 274.30 and fell to a low of Rs 256.10 in intra-day trade. The group flagship has seen a 41.3 per cent loss in its market capitalisation since January. The market was also relieved after indications that fund houses with significant exposure such as Aditya Birla Sun Life Mutual Fund (MF) and Franklin Templeton and others are backing the company, and will extend the deadline for repayment to March 2020. Queries to both fund houses remained unanswered. According to industry sources, Aditya Birla Sun Life has an exposure of Rs 750 crore in loan against shares and Franklin Templeton has another Rs 600-700 crore exposure.

A private sector lender said the Essel Group promoter might sell an additional stake in the next few days to repay them. “The promoter may sell an additional stake in Zee to a financial investor in the next few days to repay the lenders. The ball is in Chandra’s court,” said a lender, asking not to be quoted.  

Essel Group had promised that it would pay all its lenders by September end, when it announced on July 31 that it would sell an 11 per cent stake in Zee to Invesco Oppenheimer Developing Markets Fund for Rs 4,224 crore. The company has used the proceeds to repay the lenders who have an exposure of Rs 17,000 crore in promoter-owned entities. The group has also agreed to sell its 205-megawatt solar power project to the Adani group for Rs 1,300 crore.

Earlier, mutual fund houses such as Kotak Mutual Fund and HDFC Mutual Fund were pulled up by the Securities and Exchange Board of India (Sebi) for deferring payment to investors. The new deferment, however, may not be a problem. As a CEO of a mutual fund house explained: “Sebi was worried about the situation because the investments were in closed-end funds like fixed maturity plans. So, an investor can do nothing till the maturity comes. Currently, the exposure of all mutual funds in ZEEL is in open-end schemes.”