Zee lenders begin strategic sale, promoter shares moved to escrow accounts

Shares of Zee Entertainment Enterprises, the flagship company of the Essel group, surged 19 per cent on Friday after its lenders transferred a majority of the promoter family’s pledged a stake to an escrow account, for a possible sale to a strategic investor.

Promoter Subhash Chandra’s 22.37 per cent stake was pledged with a clutch of lenders. The stake sale will now be led by bankers, said a person close to the development. A majority of the promoter’s stake was pledged with VTB Capital, mutual funds (MFs), and Indian banks. On October 15, VTB Capital announced it had received the right to sell 10.71 per cent stake. 

Sources familiar with the developments said following the sale of stake to a strategic investor, the promoters might have only 12 per cent, including the 10 per cent stake with VTB. While the promoters are confident that VTB will give them more time for repayment, their stake will reduce to 2 per cent if VTB decides to proceed with selling the pledged stake to a third party. 

On Friday, the Zee stock closed at Rs 309.5, giving it a market valuation of Rs 29,727 crore. Taking into account the same, the promoter’s stake in Zee is valued at Rs 6,650 crore. Dish TV shares rose 29.2 per cent to Rs 16.15 apiece. 

According to an MF source, the funds will enable recovery of money if Zee shares touch the Rs 300-mark and the promoter’s shares are sold at this price. A US-based broadcasting and TV content distribution company is keen on acquiring the stake, and is in talks with lenders and the Chandra family, said the person cited above.

When contacted, an Essel group spokesperson said: “Essel group, in its endeavour to complete the repayment process, is in constant dialogue with all lenders, exploring various proposals received from the prospective partners. The group has maintained utmost level of transparency with lenders, and will continue to do the same as it approaches closure of the said repayment process. Any additional detail cannot be shared at this stage due to confidentiality agreements.”

The promoter entities had pledged Zee shares to invest in other non-media businesses such as roads and highways, which failed to pay dividend on account of the slowdown. After these infrastructure firms failed to repay their loans, the lenders asked the promoters to pay up.    

Group officials had said last month that the firm had paid off Rs 4,450 crore since the crisis broke out early this year, and promised it would pay all its lenders by selling assets. 

The group announced on July 31 that it would sell 11 per cent stake in Zee to Invesco Oppenheimer Developing Markets Fund for Rs 4,224 crore.  In addition, the group had agreed to sell its 205-megawatt solar power project to the Adani group for Rs 1,300 crore. The proceeds were used to repay lenders, who have an exposure of Rs 17,000 crore in Essel’s companies and to the promoters.   Fund houses with significant exposure — such as Birla Sun Life, HDFC, and Franklin Templeton — have backed the company and extended the deadline for repayment to March 2020. According to industry sources, Birla Sun Life has an exposure of Rs 750 crore in loan against shares, while Franklin Templeton has another Rs 600-700 crore of exposure.

A group official said the lenders were now leading the stake sale in the non-media business, in association with investment bankers.
With inputs from Jash Kriplani