24 June 2019: Essel or the Zee Group had entered into a standstill agreement with lenders, including mutual funds, till the promoters could sell stake in some of the assets, including in its media business, to pay off much of the accumulated debt from the infrastructure business under the Essel banner. Mutual fund houses had come under the SEBI scanner for either delaying or withholding payouts to their investors when schemes that held the Essel Group paper matured. This week, HDFC AMC took on the responsibility of providing liquidity support to the tune of Rs 500 crore towards that.
Meanwhile, the Essel Group has been close to finding buyers for some of the assets under its three lines of business — road infrastructure, electricity transmission and solar energy.
While there is no official confirmation yet on the deals, the Essel Infra projects have reportedly agreed to sell some of its solar energy assets to the Adani Group with an estimated value of around Rs 2,000 crore.
There has been a move to sell three out of over a dozen road projects in its portfolio to Canadian fund manager Caisse de depot et placement du Quebec (CDPQ), and two power transmission lines to an Edelweiss Infrastructure Fund. “The stake sale process is proceeding as per schedule, both the infrastructure and the media stake sale process are happening simultaneously,” said a Zee Group spokesperson, without commenting on the specifics of the deals.
It is estimated that the infrastructure assets deals could bring in around Rs 7,000 crore to pay for Rs 11,400 crore of debt. With the standstill agreement deadline of September not far off, the market would like to see the cash come in from the stake sale process, for comfort.
Punit Goenka, MD & CEO of Zee Entertainment Enterprises Ltd (ZEEL), had told in a television interview that they have two non-binding bids, term sheets under live negotiations and that the parties were waiting for the fourth quarter results to be published towards the end of May. It is expected that by July-end, the process would be completed.
With infrastructure assets bringing in much of the money required to pay off the debt, it eases off some pressure on the stake sale process in the ZEEL, a business that has been profitable and doing fairly well. “We believe the deal talks are progressing, and that the deal price could be much above the current market price,” said a Mumbai-based stockbroker.
“Zee’s core broadcast business and execution have been admirable over FY 2012-19 under Punit Goenka. However, the delay to sell promoter stake in the face of financial stress at a group level is persistently affecting longer-term prospects for minority shareholders. This quarter also saw a commendable pro-forma performance, but balance sheet and capital allocation are spinning out of control, in our view,” said Himanshu Shah, analyst, HDFC Securities, in a report after the Q4 earnings. He also downgraded the stock to neutral with a target price of Rs 352. The stock that traded at Rs 575 a year ago fell to a low of Rs 289 in January. High level of promoter pledge and the group debt have been the worry and a convincing move for the stock is likely only when the picture gets clearer on stake sale.