Mutual funds (MFs) with a debt exposure to Essel Group companies are likely to give more time to their promoters to repay about Rs 3,000 crore of dues beyond the September 30 deadline, according to industry sources. Last week, the promoters had partially settled the dues pertaining to loans against shares through the proceeds of a stake sale in Zee Entertainment.
Sources said most of the MFs had agreed in principle to give the promoters another six months, till March 2020, but had also asked them to try and settle the dues earlier. “After the partial payment made last week, our risks on these exposures have come down. There are interested parties for the promoters' stake in Zee, but the transaction may take some more time. The promoters have already divested part of their stake, showing the right intent of clearing the dues,” said the chief executive officer of an MF, requesting anonymity.
Responding to a query, a company spokesperson said, “Essel Group is in constant dialogue with the consortium of lenders. The overall asset divestment approach is in steady progress and the group remains focused on the repayment process. All decisions taken in this process so far have been in the interest of the lenders and have only been implemented after their consent. The group will continue to follow this approach with a sheer focus on repayment.”
On Thursday, shares of Zee Entertainment closed 7.9 per cent lower on the BSE.
There were concerns after reports suggested that an order restraining Essel Group Chairman Subhash Chandra from selling his shares could impact the group’s future monetisation plans in Zee Entertainment.
“The group wishes to confirm that the arbitration proceedings between Essel Group and Indiabulls Housing Finance do not have any bearing on the ongoing stake sale of Zee, as shares being divested are pledged with the mutual funds, non-banking financial companies and banks,” the spokesperson said. Sources suggested that MFs might also ask for some guidance from the Sebi to make sure there was no regulatory backlash if further extension was given to the promoters. According to people in the know, a sustained fall in the share price of Zee could impact the equity cover that MFs have on these exposures.
Exchange disclosures showed that as of the June quarter, 64 per cent of the promoter holdings in Zee Entertainment were pledged. The other listed companies of Essel Group where promoter pledging is on the higher side include Dish TV (94.47 per cent of promoter stake pledged), Siti Networks (90 per cent), Zee Learn (82.74 per cent), and Zee Media (93.54 per cent).
Last week, the group had cleared about half of the dues after concluding the 8.7 per cent stake sale in Zee to Invesco Oppenheimer. Overall, the MF industry had debt exposure of Rs 5,000-6,000 crore to Essel Group firms. MFs and other lenders had entered into a ‘standstill’ pact with the promoters of Essel in February where they agreed not to sell the pledged shares and give the promoters time till September 30. The additional time was given to promoters so that MF investors don't have to settle for a sub-optimal recovery by sale of pledged shares. However, the agreement didn't go down well with Sebi, with Chairman Ajay Tyagi saying that the regulator didn't acknowledge such arrangements.