Block deal: Essel Group to sell 16.5% stake in Zee

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Published: November 21, 2019 2:46:50 AM

In July, ZEEL had announced that Invesco Oppenheimer Developing Markets Fund had agreed to buy up to 11% stake from promoters, for Rs 4,224 crore.

The Essel Group has been in the process of divesting its key assets to repay lenders.The Essel Group has been in the process of divesting its key assets to repay lenders.

The Essel Group, the promoter of Zee Entertainment Enterprises (ZEEL), will sell a 16.5% stake in the media firm to financial investors in a block deal.

The proceeds of the sale transaction will be used to repay loan obligations to the lenders of the group with whom the shares are currently pledged, the company said on Wednesday.

Following the transaction, Essel Group’s overall holding in Zee Entertainment will be 5%, out of which encumbered holdings of the group will be 1.1%. Punit Goenka will continue as managing director and chief executive officer of ZEEL post the stake sale, sources said.

OFI Global China Fund, a subsidiary of the American financial investment firm Invesco Oppenheimer Developing Markets Fund, will pick up 2.3% out of the 16.5% stake sale.

In July, ZEEL had announced that Invesco Oppenheimer Developing Markets Fund had agreed to buy up to 11% stake from promoters, for Rs 4,224 crore.

The first tranche of the transaction, comprising the sale of 8.7% stake in ZEEL, was concluded in September.

Several mutual funds had received around Rs 2,000 crore from the Essel Group after the transaction was completed.

Industry observers said the 16.5% stake sale should fetch Rs 4,500-5,000 crore versus loans against shares of around Rs 7,000 crore.

“We foresee the deal as a positive as the overhang of pledge and supply will recede, and there will be continuity and efficiency in the existing management.

However, balance sheet and cash flow improvement in Zee would be key areas to watch out for,” an analyst said requesting anonymity. With the stake sale, not all loans against shares will be repaid, hence, there is a possibility of a stake sale or a merger of DishTV, a subsidiary of ZEEL, with Airtel DTH, the analyst added.

The Essel Group has been in the process of divesting its key assets to repay lenders. Earlier this year, Goenka disclosed that over 90% of the promoter holding in the company was pledged. In May, Reliance Nippon Life Asset Management sold shares of Zee Entertainment worth around Rs 400 crore that the Essel group promoters had pledged with the fund house.

ZEEL reported a 6.73% year-on-year rise in consolidated net profit to Rs 412.09 for the quarter ended September. On Wednesday, shares of ZEEL ended 7.5% up, closing at Rs 307.15 on the BSE.

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