Shares of Zee Entertainment Enterprises (ZEEL) rose 8 per cent to Rs 440 apiece, rallying 52 per cent from their January’s low on the BSE.
On January 25, 2019, the stock of Essel Group Company tanked 33 per cent to Rs 289 in intra-day trade after a report in The Wire suggested a link between Essel Group, the promoter of ZEEL, and Nityank Infrapower, a firm being investigated for suspicious deposits after demonetisation.
ZEEL however, had clarified, through a notice to the BSE, that it has no connection whatsoever with any alleged transaction(s) of Nityank Infrapower, as reported in the media.
This led to market fears/risks of pledge on promoter pledge being invoked. ZEEL promoters/ Essel Group had a 41.6 per cent stake as of December 31, 2018, with 59.4 per cent of their holdings under pledge. On January 25, 2019, 0.6 per cent of the promoter pledged shares were offloaded in the open market by lenders thus reducing the promoter stake to 41 per cent.
Post fall in stock price, the management in a conference call said the promoters are on course for the completion of strategic stake sale within the stated timelines of March-April 2019. ZEEL promoters announced their intent to sell 50 per cent of their stake to a strategic partner in November 2018.
Essel Group has also entered into an undertaking wherein any realization from infra deal or strategic stake sale of ZEEL will have the first right of the lenders.
Meanwhile, the total promoters holding in ZEEL declined to 39 per cent after its promoter entities Cyquator Media Services Pvt Ltd and Essel Corporate LLP selling 1.77 per cent and 0.85 per cent stake respectively between January 25 and February 7, 2019.
“We are still in favor of promoters selling partial stake and staying back with the partner, as no other promoter group may be able to replicate ZEE’s success in regional genres with good profitability. However, given the current situation of promoters being in a rush to sell the stake to service group-level debt requirements, there might be a case wherein the entire stake is sold to the partner. Further, there is low likelihood of a global strategic partner coming in, as the management was not in advanced stage talks with any of the potential investors, before the lenders invoked shares; we believe that due diligence with a global partner may require much more time,” analyst at Elara Capital said in company update.
“We expect price performance to remain with a positive bias in anticipation of an open offer for stake sale, selling pressure evading, as lenders hold on to their positions and fundamental business valuation turns inexpensive currently (trading at 16x FY20E P/E). We believe medium to longer-term performance still depends on the strategic partner deal structure, which is still uncertain,” the brokerage firm said.
At 03:22 pm; ZEEL was trading 6 per cent higher at Rs 434 on the BSE, as compared to 0.39 per cent decline in the S&P BSE Sensex. A combined 1.31 million equity shares changed hands on the counter on the NSE and BSE so far.