A clutch of institutional investors bailed out the promoters of Zee Entertainment Enterprises Ltd by buying a 15.7% stake in the company on Thursday, helping founder Subhash Chandra retain control of India’s largest listed television network, at least for now.
Foreign funds, including GIC Pvt. Ltd, BlackRock, HSBC Global, Fidelity India, Norges Bank, Marshall Wace, Wellington Management and local investors such as SBI Mutual Fund and Reliance Mutual Fund bought the pledged promoter stake in ZEEL through a series of block deals on Thursday, reducing Chandra’s stake in the company to just 5%, according to data from the National Stock Exchange (NSE).
Chandra will, however, continue to have management control of the company that he founded in 1991 and grew to make it one of India’s largest media conglomerates with interests in television, digital media and film distribution, among other areas. Still, the low promoter stake makes his control over the company vulnerable to hostile takeover bids.
“A company such as ZEEL with high institutional shareholding is susceptible to a takeover, maybe not immediately but in the future. Investors need to be aware of this and need to closely watch this," said Shriram Subramanian, managing director of InGovern Research Services Pvt. Ltd, a proxy advisory firm. “Shareholders will now have to decide if they want Punit Goenka to continue as CEO and if they want the current promoters to continue in their roles."
As many as 142.8 million shares of ZEEL were sold through block deals on the NSE on Thursday at an average price of ₹304 per share. The sale helped ZEEL promoters raise ₹4343.18 crore, according to NSE data.
The funds will be used to repay creditors to whom Chandra had pledged shares.
This, along with an additional ₹4,224 crore raised through a stake sale in ZEEL to Invesco Oppenheimer Developing Markets Fund, will help Chandra repay the bulk of the ₹11,000 crore-odd promoter debt that threatened to oust him.
In a post on Twitter, Punit Goenka, who is Chandra’s son, said: “Glad to share that the book was oversubscribed by approximately three times. I am grateful to our lenders and investors for their trust. I remain committed to elevate ZEE to a global media & entertainment powerhouse!"
In July, Essel Group, Chandra’s holding company, said it would sell an 11% stake in ZEEL to Invesco Oppenheimer. Of this, 8.7% has already been sold to OFI Global China Fund, a private investment vehicle of Invesco.
The remaining 2.3% is expected to be sold soon. This will make Invesco Oppenheimer the largest shareholder in ZEEL with an 18.74% stake.
On 19 September, Chandra secured a six-month extension from lenders to repay debt, given his inability to pay back more than half of his dues by 30 September as agreed in February. The standstill agreement gave the group time till 31 March to pay off debt that the promoters had taken on and invested in group companies, including Essel Infraprojects.
Mint had reported on 15 October that VTB Capital Plc, a unit of Russia’s state-controlled lender VTB Group, was in talks with two potential strategic investors to sell a 10.71% stake in ZEEL. VTB, had it gone ahead with strategic buyers, could have threatened Chandra’s control over the company.
Existing institutional investors in ZEEL include Vanguard International Growth Fund, Amansa Holdings, Vontobel Fund, Schroder International and domestic shareholders like Life Insurance Corp. of India.
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