Shares of Zee Entertainment Enterprises (Zee) gained 5 percent on Wednesday after Essel Group and lenders agreed on timeline extension. Zee shares rose as much as 5 percent to Rs 293.30 per share on BSE. At 9:30 AM, the stock price was trading 1 percent higher at Rs 282 as compared to a 0.7 percent or 287 point fall in the Sensex at 38,810.
Earlier CNBC-TV18 reported that Zee promoters met lenders for an extension of the September 30 deadline for the repayment of debt. Fifty percent of the dues has been already paid back by the company, however, the rest is yet to be paid. The deadline falls under the standstill agreement entered in January 2019.
The extension request came after a Delhi High Court-appointed arbitrator restricted Essel Group Chairman Subhash Chandra from selling unpledged shares of Zee till October 16.
In an ongoing dispute with Indiabulls Housing Finance over a default in repayment of loans worth Rs 200 crore, the arbitrator has asked the promoter to not sell unpledged stake directly or indirectly. The curb exempts shares already pledged with non-bank lenders and mutual funds.
Macquarie, in a brokerage report, said that an extension is negative for minority shareholders due to the prolonged uncertainty and would have preferred a timely conclusion of the deal in one go. It also added that the fall in stock price and uncertainty casts a shadow on the value of second stake sale. The brokerage is 'neutral' on the stock with a target of Rs 375 per share.
It further noted that there is a risk of further invocation of pledges and that the investors are worried that an extension is an indicator of lack of buying interest. They also expect multiples to be suppressed until a timely resolution of promoter issues.
However, barring the recent ad slowdown, the business fundamentals remain on track and the valuations remain attractive, Macquarie explained.
Earlier this month, Essel Group sold 8.7 percent stake to Invesco Oppenheimer and said it expects to complete the sale of the remaining 2.3 percent holding soon.
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