Zee Entertainment jumps up to 19% on promoter stake sale, pares gain later

Shares of Zee Entertainment Enterprises (ZEEL) surged up to 19 per cent to Rs 364 in the early morning deals on the National Stock Exchange (NSE) on Thursday after the promoter Essel Group sold nearly 15 per cent stake in the company for Rs 4,343 crore.

Around 142.87 million equity shares (representing 14.87 per cent stake of ZEEL) changed hands on the NSE through block deals, the exchange data shows.

ZEEL’s promoter Essel Group on Wednesday after market hours had said it was planning to sell 16.5 per cent stake in broadcasting & cable TV operator to financial investors.

“The Essel Group seeks to sell up to 16.5 per cent stake in ZEEL to financial investors, in order to repay loan obligations to certain lenders of the Group for whose benefit such shares are currently encumbered (and who have consented to such share sale by the Group),” the company said in a regulatory filing.

Out of the aforesaid, the Group seeks to sell 2.3 per cent stake in ZEEL to OFI Global China Fund, LLC and/or its affiliates, it added.

Post transaction overall holdings of the Group in ZEEL will be 5 per cent, out of which encumbered holdings of the Group will reduce to 1.1 per cent of ZEEL, it added.

The Group is also working actively on further divestments including its medial non-media assets and remains confident to complete the same.

This development reaffirms the Group's positive progress on its overall asset divestment approach, undertaken to generate adequate liquidity for the repayment process, the company said.

Foreign brokerage firm Morgan Stanley upgraded ZEEL's rating to ‘Equal-weight’ from ‘Under-weight’.

“In the past few months, heightened stock volatility could be largely attributed to sale of pledged shares and uncertainty with respect to sale of remaining pledged shares. With promoters now selling a 16.5 per cent stake (around 74 per cent of their current stake), a large portion of the promoter debt issue could be resolved. This reduces risk of pledged stock coming to the market, so we lower our bear case probability,” the brokerage firm said in a note.

“With the promoter stake expected to be down to around 5 per cent, investors will start monitoring the financial and operational performance of the business in the new incarnation (compared to promoters holding a 42 per cent stake a year back). The focus will shift towards growth in traditional business (advertising and subscription) and performance in ZEE5 with respect to investments, monetization,and market standing relative to the competition (global as well as domestic),” it said.

At 09:27 am, the stock trimmed some of its early morning gain and was trading 8.5 per cent higher at Rs 333 on the NSE . In comparison, the Nifty 50 index was down marginally by 0.06 per cent at 11,992 points.

Shares of Dish TV India were trading 3 per cent lower at Rs 16.35 on the NSE. The stock rallied 16 per cent to Rs 19.50 in early morning trade.