ZEEL posts comeback with 15 per cent gain

Zee Entertainment Enterprises (ZEEL) clarified that Essel Group is in no way related to the company Nityank Infrapower, which is facing investigations for fraud as claimed by news reports, said the company in a filing on Saturday. But on Monday, the stock posted a speculator comeback and closed up by 15.73 per cent.

The negative news resulted in a sharp fall in share price of ZEEL on Friday. The stock fell more than 30 per cent, which in turn triggered invocation of pledges and sale of 65 lakh pledged shares. It is a common practice of Zee Group companies to pledge promoter stake with lenders. Essel Group, Zee Entertainment’s promoter owned 41.6 per cent as of Dec 2018, and 59.4 per cent of this stake was pledged.  Around Rs. 8,639.50 crore worth of Zee Entertainment shares have been pledged by its promoters, according to data on BSE website. The sharp fall in share price of ZEEL resulted into a breach of covenants with lenders, thus, triggering risk of pledge invocations.

Reacting to the pledge invocation, the company’s management clarified that it was in talks with its lenders who have agreed not to invoke the pledge on promoters shares. The company’s promoters have given assurance that they can carry out the strategic stake sale in a time-bound manner. 

Further, the group is in process of monetising a few of its infra assets which are likely to fetch Rs. 20,000 crore enterprise value and help in reducing the debt burden which is overhanging on the group. 

With this buzz, the other companies of Essel group, Essel Propack and Dish TV India also corrected a lot on Friday. However, this debt burden is purely at the promoter level which is separate from the businesses they own. Thus, the business of Zee Group companies has remained intact. 
  
Recently, ZEEL reported its Q3FY19 numbers which were quite impressive. Its revenue for Q3FY19 surged to Rs. 2,167 crore from Rs. 1,838 in the same quarter of the previous year. Also, its net profit jumped to Rs. 563 crore from Rs. 374 crore in Q3FY18.

After the clarification from the company's management, the stock of ZEEL surged as much as 19 per cent in Monday’s trading session to touch an intra-day high of Rs. 380.80 apiece. The stock settled for the day at Rs. 368.50 per share, up by almost 15.73 per cent from its previous close.