Zee Entertainment’s promoters Essel Group sold 15 crore or 15.72 percent shares via block trades to financial investors at Rs 304 per share against the floor price of Rs 277 per share, raising Rs 4560 crore. Proceeds from the sale will be used to repay lenders who lent to the promoters against pledged shares. Lenders who stand to recover their loan include VTB Capital (Rs 2000 crore), Birla MF (Rs 750 crore), HDFC PMS (Rs 550 crore), L&T Finance (Rs 250 crore), and ICICI Prudential (Rs 270 crore).
Zee Entertainment stock spiked in opening hours of trade on the back of this development.
Essel Group seeks to sell a total of 16.5 percent stake to financial investors which includes 2.3 percent to existing investor Invesco Oppenheimer that has been pending from the last transaction of 11 percent stake sale. This makes Invesco Oppenheimer the single largest shareholder in Zee Ent with 18 percent stake.
The development confirms CNBC-TV18 exclusive on November 11, 2019 which stated that Zee shares would be sold to wider financial investors to provide resolution to the loan against share issue.
Post the stake sale, Essel Group will retain 5 percent stake in the company. Punit Goenka is likely to continue as the managing director and CEO of the company. Essel Group’s encumbered holdings will reduce to 1.1 percent in ZEEL post this deal from the current 10.71 percent on account of loan taken from VTB Capital. VTB Capital, mutual funds and other lenders have transferred their shares in an escrow account for the sale process.
People aware of the development said on condition of anonymity that the single largest shareholder Oppenheimer is backing the current management for continuity of future performance of Zee Entertainment. The people also added that due to the lack of any strategic sale of Zee Entertainment, Essel Group with minority shareholding may continue to run the business.
Zee Entertainment board had recently re-appointed Goenka as the managing director and CEO of the company. The appointment will have to be approved by the shareholders.
In a statement following the stake sale, Goenka said that he remains committed to make Zee into a global powerhouse.
“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 and entertainment powerhouse," Goenka said.
Essel Group recently concluded roadshows with investment banks Citi and JPMorgan to build a book for the sale of shares. “Investors are betting on the returns after the overhang of shares against loan lifts and fundamentals of the business start reflecting in the stock” an expert with direct knowledge of the development shared with CNBC-TV18.
The total promoter holding in Zee had come down to 22.37 percent at the end of September, of which 96 percent was pledged with lenders. VTB Capital had 10.71 percent encumbered shares in Zee, promoters had pledged the remaining 10.77 percent to a clutch of domestic non-banking finance companies (NBFCs), mutual funds, and banks with a total obligation of Rs 7,000 crores.
Essel Group in a press statement said: “This development reaffirms the Group's positive progress on its overall asset divestment approach, undertaken to generate adequate liquidity for the repayment process. The group is also working actively on further divestments including its media/non-media assets and remains confident to complete the same.”
While this is likely to resolve the loan against shares for Zee Entertainment, Essel Group is taking other steps to divest assets to raise funds and repay remaining group debt.