Zee Entertainment turns volatile as promoters plan to sell stake

Shares of Zee Entertainment Enterprises (ZEEL) turned volatile after falling 4 per cent to Rs 420 on BSE in early trade on Wednesday as on Tuesday company announced that its promoters led by Subhash Chandra planning to sell up to 50 per cent of their equity stake in the company to a strategic partner.

The stock moved higher by 7 per cent to Rs 470, bouncing back 12 per cent from its early morning low. At 02:28 pm, it was trading 0.38 per cent lower at Rs 437, as compared to 0.23 per cent decline in the S&P BSE Sensex. The trading volumes on the counter jumped more than 10-fold with a combined 16 million shares changed hands on the BSE and NSE so far.

As of the quarter ended September, promoter and promoter group firms held 41.62 per cent stake in ZEEL.

ZEEL said that the proposed transaction to divest up to 50 of Essel’s holding to such a partner is expected to address the Essel Group’s capital allocation priorities and will allow the shareholders to capture the full value of India’s largest entertainment broadcaster with an ever-strengthening bouquet.

Essel expects the outcome of the strategic review to be concluded by March/April 2019. It hopes that this transaction will meet the objectives of the Essel Group as well as the minority shareholders of ZEEL, it added.

Motilal Oswal Securities said it is unsure if the intention to sell the stake is purely to improve technological capability, as the motive could have also been achieved via acquisition – given its strong cash position or raising equity in the company to incur investment.

“Current promoter pledge stands at 59 per cent, which has increased by 13 per cent over the last three quarters. Over the last six months, the stock has corrected by around 32 per cent. We believe that the potential players in the media tech industry could be global/Indian ecommerce players or telecom operators, as management indicated that the lines are getting thinner between media and telecom,” the brokerage firm said in an event update.

Given the strategic nature of the transaction and the potential change in the nature of the medium to long-term business model of the company, we await more clarity from the management in the conference call scheduled today, before reviewing estimates, target price and rating, it added.