ZEE Entertainment selects financial investor, stock plunges

ZEE Entertainment Enterprise (ZEEL) on Wednesday announced the much-awaited stake sale deal. The Invesco Oppenheimer Developing Markets Fund has agreed to buy 11 per cent stake in ZEEL. This deal would result in the removal of overhang on the Essel Groups owing to liquidity concerns. Essel Group has scheduled debt repayments by September 2019.

This development will help ZEEL's promoters to retain management control, but the street seems to have found the deal disappointing as the company choose a financial investor instead of a strategic investor. At present, the Invesco Oppenheimer Fund owns nearly 7.29 per cent stake in ZEEL and this deal will increase its holding to 18.7 per cent.

Apart from stake sale in ZEEL, the promoter group (Essel) is also looking to monetise its stake in some of its non-media assets. The company’s management believes that it could meet the September 2019 deadline to repay all its debt (approx. Rs. 11,000 crore which also includes accrued interest) and if it fails to repay its debt within stipulated time then it would even dilute its some portion of stake in ZEEL but will try to keep the management control with it.

The earlier there was anticipation that promoters will sell their stake to a strategic investor thereby generating some synergies. Reacting to this development, the stock of ZEEL plunged nearly 7 per cent in Thursday's morning session.