Promoters replenish Rs 200 cr for Zee Entertainment to avoid capital loss

The promoters had earlier sold their 11% stake in Zee to Oppenheimer

The promoters of Zee Entertainment Enterprises have ring-fenced the media and entertainment company by replenishing Rs 200 crore in order to avoid a loss of capital. The Subhash Chandra family made the move despite the fact that it is in a serious financial crunch, say sources in the company. 

Zee, in a concall on Thursday, pointed out the company had a fixed deposit (FD) of Rs 200 crore with a bank.  But that bank decided to break the FD to clear the dues of some related parties. 

According to the company, during the quarter ended September 30, 2019, the bank prematurely and unilaterally adjusted the amount of the fixed deposit, which was maturing on September 10, 2019, against the dues of related third parties.

Managing Director Punit Goenka on Thursday in a concall after the quarterly results said the company was thinking of action as well as compliance with statutory and legal requirements. 

Zee missed analysts’ expectations when in its Q2 results (June-September quarter) it announced that it was providing for inter corporate deposits to the tune of Rs 170. 62 crore. As a result, the company’s profit after tax fell by 22 per cent year on year to Rs 504 crore and it said the write-off of the ICD was being reported due to related parties delaying payment.  

With 90 per cent of the promoters’ stake (22 per cent in Zee) already pledged to financial institutions, defaults on ICDS have had an adverse impact on the company’s share price which fell by 5.58 per cent on Friday to close at Rs 249.70 a share. 

The promoters had earlier sold their 11 per cent stake in Zee to Oppenheimer to repay more a substantial portion of their Rs 11,000 crore debt. Of their current shareholding, the promoters have also pledged about 10.71 per cent of the 22 per cent that they own in Zee to VTB Capital against loans. Speculation has been rife that the Russian company might look at invoking the pledge and selling the stake which would make the promoters minority shareholders in the company. But the promoters have pointed out that they are in continuous dialogue with VTB on the pledged shares.

The group has been looking for divesting its core non media assets to pay part its debt repayment, which stands at Rs 5,400 crore to mutual funds after they struck a deal to sell their some of their solar assets to the Adanis for Rs 1,300 crore.