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Sony Corp may buy a 20-25% stake in ZEEL for Rs 13,000 crore: report

Sony Corp may buy a 20-25% stake in Zee Entertainment Enterprises Ltd (ZEEL) worth Rs 13,000 crore, reports Mint. Sony would want at least 25%, which would give it promoter rights, it added. Zee and Sony declined to comment on the matter to the publication.

Group chairman Subhash Chandra is looking to sell the stake for a premium of 30%, the report added, stating that Chandra wants to hold at least a 20% stake in the company. Mint’s source arrived at Rs 13,000 crore by stating that there were 940 million shares, at Rs 650 level, Chandra selling 19% would get the company Rs 13,000 crore.

Mint reported that Reliance Industries had also spoken to Chandra about a possible offer, but this had not gone through.

ZEEL’s capital allocation woes

ZEEL first started looking for a buyer early last month, when the company was in talks with 3 ‘prospective foreign strategic investment entities.’ In November 2018, the Essel Group said that it would divest upto 50% of its 41.6% stake in ZEEL to a strategic partner to address its “capital allocation priorities.” Chandra and his family said that after reviewing technology advancements like AI, IoT, AR, VR and the convergence of telecom and media, the company had decided to divest from ZEEL.

ZEEL CEO and MD Punit Goenka, who is also Chandra’s son, told the Times of India that the sale process was triggered after a “global media giant” made an offer to buy into ZEEL. ZEEL had attempted to find a strategic partner for ZEE5, “but the potential investors sought covenants with the parent.”

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In late January, Zee’s stock crashed 33.4% on the BSE due to a news report claiming that Essel Group could be a part of a Serious Fraud Investigation Office probe pertaining to deposits of Rs 3,000 crore during demonetisation. Chandra said that Essel had solidified an agreement with lenders where it would pledge the group shares. But a week after this announcement, nothing was signed off by lenders, rendering the announcement false, according to this NDTV report. Over this weekend, Catalyst Trusteeship sold 74 lakh of its shares at Rs 361.42 per share.

ZEEL’s revenues

ZEEL reported consolidated revenues of Rs 2167 crore for the quarter ended 31 December 2018, up 18% from the same quarter the year before. The company said that this growth was driven by ‘strong performance of our broadcast business.’ EBITDA stood at Rs 754 crore, reporting an increase of 27% YoY and Profit after Tax (PAT) stood at Rs 562 crore in the quarter ending December 31, 2018 (Q3FY19). Total expenses of the company rose by 13.6% YoY while advertising and promotional expenses grew by 12% YoY in the quarter.

Our Zee and ZEEL coverage.

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