Zee Entertainment Enterprises Rating: Buy; Stake sale partially addresses concerns

Zee Entertainment (Z IN, Buy) announced recently promoter stake sale of ~11% to an existing financial investor, Invesco Oppenheimer Developing Markets Fund, for a consideration of `42.24 bn. This effectively values the company at `400 per share, at ~11% premium to that day’s closing of `362.

We note that as of Jun-19 end, promoters’ shareholding in Zee stood at 35.79%, of which 63.98% was pledged. Overall, for the promoter group, the total loans pledged against all shares stood at `110 bn. Hence, this effectively addresses only 38% of the pledging till now. Promoters indicated that they are in the process of divesting their stake in other key assets, and are fairly confident of the sale happening within the targeted deadline (30 Sep, 2019).