Netflix Effect: Zee to sell stake to up its game

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New Delhi | Published: November 14, 2018 3:39:22 AM

With foreign players making inroads into the increasingly popular OTT (over-the-top) space, promoters of Zee Entertainment Enterprises (ZEE) on Tuesday said they would sell up to 50% of their 42% equity stake in the company to a strategic partner.

The promoters are considering options for foreign investments at the parent level and the Zee5 level — the OTT platform of the group.

With foreign players making inroads into the increasingly popular OTT (over-the-top) space, promoters of Zee Entertainment Enterprises (ZEE) on Tuesday said they would sell up to 50% of their 42% equity stake in the company to a strategic partner.
“We are not willing to give up control in Zee,” Punit Goenka , MD and CEO, ZEE, said.
He added that it was possible the strategic global partner could initially buy a small stake and scale it up. “Things can change over time,” he added.

The promoters are considering options for foreign investments at the parent level and the Zee5 level — the OTT platform of the group. Moreover, new shares could be issued in either the existing firm or a new entity could be created.

“We are hoping to get a significant premium over the current market price, given we are the number one television and a strong OTT player,” Goenka said.
Zee’s market capitalisation is currently Rs 42, 090 crore and as on September 30, the company had just over Rs 3,000 crore of cash and equivalents on its books.

Industry watchers have pointed out that Zee could capitalise on its strengths — ability to create content cost-effectively and its connect with the Hindi-speaking population —if it found a joint venture partner with complimentary attributes. They said Indian broadcasters would be best-placed if they co-owned and operated OTT platforms, a concept pioneered by the US-based Hulu.

Analysts had downgraded the stock as they expected a shift in ad spends to OTT from television in the next three to four years. They believe Zee would find it hard to maintain share in the OTT market as the competition is intense.

“The interest and investments of global companies in India’s OTT space are overwhelming and perhaps disproportionate relative to the monetisation opportunity,” analysts at Kotak Institutional Equities wrote. They pointed that while Zee scores well on content it lags competitors on product technology and capital.

Zee has retained Goldman Sachs and Liontree as advisers for the exercise and hopes to conclude the deal by March, 2019.

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