Mutual funds, that had lent to the the cash-strapped Essel Group against shares of Zee Entertainment, are expected to get their monies back early next week.
Shares of Zee Entertainment Enterprises hit a two-month high on Thursday, ending the day with a 12.40% gain on the BSE, as the overhang of promoter pledges ended with the Essel Group selling a 16.5% stake in the media company on Wednesday.
Mutual funds, that had lent to the the cash-strapped Essel Group against shares of Zee Entertainment, are expected to get their monies back early next week. The transaction fetched the promoters Rs 4,817 crore. Market participants say that entities such as GIC, BlackRock, HSBC Global, Capital Research along with SBI MF, Segantii Capital, Marshall Wace, Norges Bank, Key Square, ICICI Prudential, Reliance MF and Wellington Management have acquired shares in the media major.
Following this transaction, promoter shareholding will come down to 5%, even as they retain management control. Zee Entertainment Enterprises MD & CEO Punit Goenka said: “I am overwhelmed by the positive response received from our investors. Glad to share that the book was over-subscribed by approximately three times. I am grateful to our lenders and investors for their trust and support. I remain committed to elevate Zee to a global media & entertainment powerhouse.”
Senior officials from the mutual fund industry say that Aditya Birla Sun Life MF will get around Rs 850 crore, HDFC MF will get approximately Rs 550 crore and ICICI Prudential MF will get Rs 270 crore. Market participants say, apart from mutual funds, banks and non-banking financial companies will also get money from the stake sale.
Essel Group on Wednesday said it would sell up to 16.5% 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 Essel Group will now have to work actively to sell its non-media assets to repay the outstanding loans.
As on September 30, promoters owned a 22.37% stake in Zee, of which 96% was pledged with lenders. In a report, Edelweiss on Thursday said: “Following this stake sale, the promoters would get around Rs 4,560 crore (at `304 per share). Previously, 96% of the promoters’ stake was pledged in ZEE and the group had approximately Rs 7,000 crore worth of shares pledged. In our view, the stake sale would remove the overhang related to promoter pledge — down from 96% to 20% (1.1% of company stake). Besides, with marquee investors coming in, corporate governance will get a leg-up and create positive business vibe.”
In July this year, the Essel Group had entered into an agreement to sell up to 11% promoter stake in ZEEL to Invesco Oppenheimer Developing Markets Fund for Rs 4,224 crore. In September, several MFs had received around Rs 2,000 crore from the Essel Group after it announced the successful completion of the first tranche of stake sale to Invesco Oppenheimer Developing Markets Fund. Aditya Birla Sun Life AMC had received Rs 765 crore, HDFC AMC Rs 580 crore, ICICI Prudential AMC and Kotak Mahindra AMC Rs 434 crore and Rs 208 crore, respectively.