Shares of Zee Entertainment Enterprises Ltd rose 6% intraday on Tuesday, rising 41.7% from the low of ₹288 hit on 25 January when it had slumped more than 26%, its biggest single-day fall since listing in 1993. Shares of Zee Entertainment Enterprises Ltd ended at ₹409.40, up ₹12.75 or 3.21%.
Global brokerage firm Macquarie has reiterated ‘buy’ rating on the stock with a 36% upside. It said that presence of five suitors, mostly global, reaffirms its view that there is a lot of interest in Zee at current valuations. “Despite near-term disruption due to execution of the tariff order, we reiterate that Zee has ₹2,900 crore net cash and fundamentals remain strong," Alankar Garude, analyst, Macquarie Capital Securities (India) Pvt. Ltd, said in a note on 22 April.
According to Garude, apart from the deal value, the biggest monitorable for minority shareholders should be whether the current management is retained. “If yes, it augurs well,in our view, given the strong track record of execution. If not, then the acquirer’s game plan needs to be closely studied. With a deal announcement eminent, at 21 times FY20 PER, we think there is ample margin of safety," he added.
In a media interview, Subhash Chandra, chairman of Zee Entertainment, reaffirmed the stake sale timelines and shared more details on the suitors. According to Zee, it has five suitors from India, Japan, Europe and the US. Reversing its earlier stance of engaging only with strategic partners, Chandra mentioned that Zee is not averse to any financial investor. “Reasons for the suitors showing interest in Zee include direct access to 1.3 bn people, valuing Zee’s expertise in content creation at reasonable cost, and an opportunity to create a combination of content and e-commerce," Macquarie said.
Garude added that Zee is confident of being able to meet the 30 September deadline of repaying lenders. The promoters are focussed on trying to complete the infra projects and then sell these assets between July-September 2019. According to the promoters, other non-core businesses such as Essel Finance, mutual funds as well as some of their personal real estate assets will also be sold.
Out of analyst which have coverage on Zee Entertainment Enterprises Ltd, Zee has 24 ‘buy’ rating, 8 ‘hold’ rating and 4 ‘sell’ rating according to Bloomberg data.
Altogether, nine asset management companies (AMCs) have lent to Essel Group across 87 schemes, including FMPs and open-ended debt funds. Other funds that have exposure to Essel Group debt are SBI Asset Management Co. Ltd, HDFC AMC, Reliance Nippon Life Asset Management Ltd, Franklin Templeton Asset Management (India) Pvt. Ltd, Aditya Birla Sun Life AMC Ltd, UTI AMC Ltd, Baroda Asset Management India Ltd and ICICI Prudential AMC.
The redemption clock began ticking in January when the Essel Group companies, to which mutual funds had lent a combined ₹7,000 crore against debt securities, neared a payment default. The funds agreed not to sell the pledged promoter shares until end-September.