In a bid to pare debt and pay off loans at the promoter group, Subhash Chandra-led Essel Group is selling 11 per cent stake in flagship media company Zee Entertainment Enterprises to Invesco Oppenheimer Developing Markets Fund for up to Rs 4,224 crore.
The US-based fund, which is an investment company registered with the Securities and Exchange Commission, has been a financial investor in Zee Entertainment since 2002. According to Zee's shareholding pattern, Oppenheimer Developing Markets Fund held 7.74 per cent stake in the company as of June 30. Foreign portfolio investors held 47.07 per cent in Zee.
Essel Group has to repay debts to its lenders taken by the promoters for its infrastructure business, and has been in talks to sell part of its stake in the Zee for the same for some time. As of June 30, the promoters had held 35.79 per cent stake in Zee and 63.98 per cent of that was pledged. The promoter debt stood close to Rs 13,000 crore.
Essel Group had reached an understanding with lenders in February with respect to the pledged shares. As per the consent, the lenders had agreed that there would not be any event of default declared till September 30, 2019, due to the movement in the stock price of Essel Group’s listed corporate entities and that would give the required amount of time for the management, to complete the strategic sale of its key assets. It owes Rs 7,000 crore to mutual funds, and a stake sale by September was necessary to avoid a default.
"The announcement of 11 per cent stake sale of Zee to the fund is a strong step in the overall divestment process, giving the promoters the required financial fillip to initiate the repayment process," it said on Wednesday.
"We believe this development to be a positive step towards meeting Zee’s desired target of stake sale by September 30. We expect the management to achieve success in meeting this deadline by doing a further stake sale and sale of non-media assets," said Ashwin Patil, senior research analyst at LKP Securities.
Apart from Zee, Essel Group is also in the process of divesting some of its non-media assets. It is confident of completing the process of repayment, well within the agreed timeline, it further added.
Zee Entertainment shares ended down 5.2 per cent on Wednesday at Rs 361.45 a share. The formal announcement of the stake sale came after markets closed.
