ZEEL hits over 6-yr low after Essel Media pledges 11% equity with VTB Cap

A little over 90 per cent of the promoters' 22 per cent shareholding in ZEE is pledged with financial institutions, the management said during an investors' call

Shares of Zee Entertainment Enterprises (ZEE) hit an over six-year low of Rs 204, plunging 14 per cent in early morning deals on the BSE on Monday, after the company announced that its promoter Essel Media Ventures have pledged 10.71 per cent equity with VTB capital. The encumbrance was created pursuant to a loan agreement executed on September 4, 2017. The stock hit its lowest level since April 18, 2013.

VTB Capital PLC, was acting as the security agent on behalf of certain lenders, namely VTB Bank (Europe) SE, Austria Branch, LLC VTB Capital Holding IB and VTB Bank (Europe) SE, the company's management said.

"A little over 90 per cent of the promoters’ 22 per cent shareholding in ZEE is pledged with financial institutions. Following the agreement to sell an 11 per cent stake to Invesco Oppenheimer in September, the promoters’ loan against shares stands at Rs 7,000 crore, as against Rs 13,500 crore on January 26, 2019," Punit Goenka, ZEE Managing Director and Chief Executive Officer told investors during an investors' call on Saturday. CLICK HERE TO READ FULL REPORT

Despite its strong performance in the recent past, Motilal Oswal Securities have ‘Neutral’ stance on ZEE due to the risk of promoter group losing management control. The current value of shareholding stands at a meager Rs 5,000 crore v/s loan, as against pledged shares at Rs 6,500 crore (post 2.2 per cent sale to Oppenheimer).

This, the analysts say, is important as Zee remains the only consistently profitable company in the broadcasting space spearheaded by the current promoter group.

“The value of the other non-media infra assets too are worsening in the current environment, holding Rs 12,000 crore debts (as of Jan’19) in the operating companies. This could not only reduce the fund raising possibility but also create further debt woes in the operating companies; and peers like Sun TV too are valued at P/E of 12x on FY21E in line with ZEE’s valuation of 11x on FY21E, and therefore, overall industry valuation has reduced making ZEE less attractive compared to peers,” the brokerage firm said in company update.

At 10:00 am, ZEE was trading 7.5 per cent lower at Rs 219 on the BSE, as compared to a 0.26 per cent rise in the S&P BSE Sensex. A combined 16.9 million equity shares changed hands on the counter on the NSE and BSE till the time of writing of this report.