ZEEL – Reaches A Climax

ZEEL - Reaches A Climax

Going by the recent turn of events at Zee Entertainment Enterprises (ZEEL), the satellite channel broadcaster promoted by Subhash Chandra, it seems the change in guard will happen soon.

On Wednesday, the company informed the bourses of three independent directors resigning from the board.

Earlier in the week, Subhash Chandra relinquished as a Chairman of the board. He will, however, remain a non-executive director of the cash-strapped company.

Chandra bow downed to a $1.6 billion debt burden. His decision to enter into infra business for which he took up endless loans triggered the downfall.

He lost half of his wealth in a year. To meet their financial obligations, the promoters of ZEEL sold a chunk of their holding in open markets.

The shares were gobbled by institutional investors. Post this transaction, promoter stake will stand reduced to the bare minimum level.

This transaction made Chandra more vulnerable.

The promoter’s action is induced by the decision of clutch of asset managers, non-bank lenders and foreign portfolio investors to put ZEEL promoters pledged shares in an escrow account in preparation for a sale.

Russian financial institution VTB Capital has also kick-started the process of selling 10.71% in the media company. Lenders are also expected to transfer another 10.77% to the escrow account.

As of now, the promoters of Essel Group own 22% shares in ZEEL.

If the entire pledged holding is sold off, Chandra will be left with a 0.89% stake in ZEEL.

This resulted in its share price coming under severe pressure. Future uncertainty triggered investor exodus.

Generally, market price discount management continuity/stability in pricing a stock. With the promoter group stake reduced to a bare minimum level and key personnel relinquishing their position, ZEEL’s future remains unclear for now.

It will be interesting to see whether it falls in strong hands or crumbles under its debt weight. Interestingly, it has reached anti-climax.

What does all this mean for zee’s institutional and Retail shareholders ahead?
We believe that it is most likely that in future the company management will change and may go into the hands of a new media player possibly an Mnc foreign media house which is already on the lookout to increase there presence in India

The presence of such a large opportunity in the form of zee entertainment is hence very attractive from a long term point of view.

Firstly zee entertainment biggest positive is its strong business model large cash flows and dominant brand both in the broadcasting and ott space

Hence any weakness in the stock price for zeel will be used by these large players to buy into the stock which will pave the way for future wealth creation here in this phase of growth going ahead