Zee Entertainment Enterprises Ltd (ZEEL) on Thursday said it was forced to make provisions worth ₹170 crore in the quarter ended 30 September, due to delay in the recovery of a loan to an outside entity. In a stock exchange filing, Subhash Chandra’s flagship company also said that a bank where ZEEL maintained a ₹200 crore deposit adjusted the sum against the dues of certain other related parties.
ZEEL said it recorded a revenue of ₹2,122 crore in the September quarter, up 7.4% from the year-ago period, while profit grew by 6.9% to ₹413.2 crore. The growth was driven by the strong performance of domestic broadcast and digital businesses, the company added.
However, the filings with the stock exchanges also revealed certain issues that the Essel Group company faced in the quarter due to related party loans. “The company had a fixed deposit of ₹200 crore with a bank. The bank has prematurely, unilaterally adjusted the amount of the fixed deposit, which was maturing on 10 September 2019, against the dues of certain related parties."
Subsequently, these related parties reimbursed the amounts to the company, it said, adding the company is in the process of investigating, seeking legal advice on the appropriate action to be taken, as well as compliance with statutory and legal requirements.
ZEEL’s auditor Deloitte Haskins and Sells said it cannot comment on the recoverability or impact of this event on the consolidated statements of the company.
“On account of non-availability of relevant information/documentation i.e. bank confirmation/communication from the bank, etc. for our review and pending outcome of the Parent’s (ZEEL) investigation, including in respect of statutory and legal requirements/compliance, we are unable to comment on status/recoverability of the said fixed deposit, the accounting of the same including for the amounts received from the related parties and any other consequential impact on these consolidated financial results," the auditor said in a note.
ZEEL also took a hit of ₹170.62 crore in its profitability due to a provision made for delays in recovering the money it has lent. “The company had, in an earlier year, given an inter-corporate deposit (ICD) aggregating ₹150 crore. On account of delays in recovery of the amount, the ICD was assigned to certain related parties, to secure payment of ₹170.62 crore (including accrued interest up to the date of assignment). Since, there are further delays in receiving payment from these related parties, during the quarter ended 30 September 2019, the aforesaid amount has been provided for," it said.
The disclosures come at a time when the Essel Group is scrambling to repay its debt obligations.
On 19 September, the Essel Group secured a six-month extension from local lenders, including mutual funds, to repay debt.
Mint had reported that 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 ZEEL. On Tuesday, VTB said it has secured the rights to sell Essel Media Ventures Ltd’s 10.71% stake in ZEEL to recover loan dues.
If the deal goes through, it may threaten Chandra’s control over the company he had founded. Chandra, Mint had reported, is also in negotiations with VTB to buy back the shares.
On 31 July, the Essel Group had agreed to sell 11% promoter stake in ZEEL 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.