Subhash Chandra scrambles to retain Zee reins amid VTB’s stake sale talks2 min read . Updated: 15 Oct 2019, 11:58 PM IST
- VTB is in talks with an Indian conglomerate and an international corporation to sell the stake
- The sale could expose Zee to hostile takeover bids
Mumbai: VTB Capital Plc, a unit of Russia’s state-controlled lender VTB Group, is in talks with two potential investors to sell a 10.71% stake in Zee Entertainment Enterprises Ltd, two people directly aware of the development said.
A spokesperson for VTB Capital declined to comment for this story.
If the deal goes through, it may threaten promoter Subhash Chandra’s control over the company he founded. Chandra, according to the people cited above, is also in negotiations with VTB to buy back the shares.
“VTB could sell the entire stake in one go or through multiple deals over a period of time," said one of the two people. “If it chooses to do the latter, then it will pull Zee Entertainment’s share prices further down and this, in turn, can have a domino effect on other lenders, who also own pledged shares of Zee Entertainment."
The sale could expose Zee to hostile takeover bids, the second person said.
The promoter group led by Subhash Chandra, the people said, has offered to prepay a portion of VTB’s outstanding loan of around ₹2,000 crore from the proceeds of the remaining stake sale to Invesco Oppenheimer, which already owns a substantial stake in the company.
On 31 July, Essel Group agreed to sell an 11% promoter stake in Zee Entertainment to Invesco Oppenheimer Developing Markets Fund for ₹4,224 crore. The first tranche from this sale was used to meet part payments of ₹3,356 crore to lenders, primarily mutual funds. The second tranche for the remaining 2.3% stake of around ₹868 crore is yet to be paid. The stock price of Zee Entertainment has fallen significantly since Oppenheimer bought it at ₹400 apiece. On Tuesday, shares of Zee Entertainment gained 3.4% to ₹250.80.
On 19 September, Essel Group secured a six-month extension from local lenders, including mutual funds, to repay debt.
“The Essel Group is in constant dialogue with VTB Capital Plc to arrive at a satisfactory resolution," a group spokesperson said. “The group is actively working towards the completion of the overall divestment process of its media and non-media assets and remains confident to repay all the lenders."
In its exchange filing, VTB Capital also said it is hoping to reach a resolution with the promoters and will willingly cease all enforcement action and release the encumbrances upon repayment of the amounts outstanding.