Promoters to sell majority stake in Zee to pare debt

The Subhash Chandra-led Essel Group will be selling a majority of its remaining stake in flagship media and entertainment company Zee Entertainment Enterprises Ltd (ZEEL) to financial investors in order to repay debt. The company announced in a statement on Wednesday evening.

“The group seeks to sell up to around 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). Out of the aforesaid, the group seeks to sell around 2.3% stake in ZEEL to OFI Global China Fund, LLC and/or its affiliates,” the group said in its statement.

With this share sale, the Essel Group’s stake in ZEEL will fall to around 5%. It was reported that Punit Goenka, ZEEL’s managing director and chief executive officer will continue to lead the business. However, it remains to be seen whether Subhash Chandra and his sons, Punit and Amit Goenka would continue to be classified as promoters of the business.

The Essel Group, which has interests ranging from media and entertainment to roads and renewable energy, was due to pay around ₹7,500 crore to lenders including some of India’s top mutual funds by September 30. Since the group was in advanced stages of negotiation to sell multiple assets that it owns, lenders had given a temporary reprieve to the group and extended the deadline for repayment to “enable the group to optimise the value output from the sale of its assets.”

In August, Essel agreed to sell an 11% stake in ZEEL to Invesco Openheimer Developing Markets Fund for ₹4,224 crore. Assuming that the deal to sell the additional 16.5% stake in ZEEL materialises at the same valuation, it could fetch the group an additional ₹6,336 crore. The group didn’t mention the valuation at which it will be selling a further stake in ZEEL in its statement. It is also possible that the deal could have been struck at a lower valuation since Zee’s share price has declined substantially since the deal with Invesco Oppenheimer was announced.

Zee’s stock price closed at ₹307.15 per share on the BSE on Wednesday, up 7.49%. The bourse’s benchmark index, S&P BSE Sensex ended 0.45% higher at 40,651.64 points.