Zee Entertainment slips 25% in seven days, trades near 52-week low

The stock was trading at its lowest level since January 25, 2019 and was 5 per cent away from its 52-week low of Rs 289 touched on the same day.

Shares of Zee Entertainment Enterprises (ZEEL) were trading lower for the seventh straight session on Tuesday. The stock slipped 8 per cent to Rs 305 on the BSE in the intra-day trade in an otherwise firm market. The stock of media & entertainment company was trading at its lowest level since January 25, 2019 and was 5 per cent away from its 52-week low of Rs 289 touched on the same day.

Since July 26, in the past seven trading days, the share price of ZEEL has slipped 25 per cent Rs 404, as compared to a 2 per cent decline in the S&P BSE Sensex. Last month, the promoters of ZEEL had sold a more than 10 per cent stake in the company to pare debt.

On July 31, ZEEL announced that Invesco Oppenheimer Developing Markets Fund had agreed to buy up to an 11 per cent stake in the company from its promoters, for a total consideration value of up to Rs 4,224 crore.

Invesco Oppenheimer funds have been an investor in ZEEL since 2002. It held 7.74 per cent in the company as of June 30, according to exchange data. Post completion of the deal, the Oppenheimer stake in the company will be around 19 per cent.

Though this transaction provides some breathing space to the Essel Group promoters, it doesn’t entirely resolve the group level debt issue, according to analysts at JP Morgan.

The foreign brokerage firm believes the medium-term growth outlook faces risk from the need for sustained high investments to ensure a successful play in the over-the-top (OTT)/Digital segment (growing ad revenue shift to digital medium, intensified competitive landscape) and growing consolidation amongst telcos (content aggregation, TV distribution, etc).

Debt is around Rs 11,000 crore at the group level as on FY20. Analysts at Elara Capital believe this stake sale has resolved only half of concerns.

"The only positive outcome of this deal is promoters retain control and are motivated to run the business. However, we are surprised by management’s confidence over fetching a higher value for non-media assets (infra, solar and transmission), given troubled times in these verticals," the brokerage firm said in a company report dated August 1, 2019.

The stock does not provide scope for a major rerating, given the threat of digital content consumption, which would be bolstered further by the launch of Jio FTH in the near term, it added.

At 01:15 pm, ZEEL was trading 6 per cent lower at Rs 312 on the BSE, as compared to a 0.85 per cent rise in the S&P BSE Sensex. A combined 15.6 million shares changed hands on the counter on the BSE and NSE till the time of writing this report.