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Last Updated : Nov 05, 2019 09:40 PM IST | Source: Moneycontrol.com

Even without control, not all is lost for Zee promoters, say experts

Meenakshi Tiwari, forecast analyst at Forrester, thinks that while Zee promoters will lose their control of the company, the partners coming on board would want the help of the current management, especially in the digital business.

 
 
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There is uncertainty looming over Zee Entertainment as reports suggest that lenders to Essel Group are looking to sell pledged shares.

Selling off all pledged shares would mean Zee promoters losing control and there is a strong possibility of such a situation. However, a lot depends on who buys Zee as a strategic partner would want the promoters to guide a company they have led for so long.

According to Karan Taurani, analyst, media and entertainment, Elara Capital, Zee promoters are bound to lose control.

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"It all depends on who the partner is and if the partner wants the current promoter to run the business which they are doing very efficiently, in that case they might have managerial position. But losing control is bound to happen. There will be some kind of power changes. But there will be substantial amount of decision-making power in the hands of the promoters," he said.

While Utkarsh Sinha, Managing Director of Bexley Advisors, a boutique investment bank, said that it is difficult to ascertain whether lenders are going ahead with Zee stake sale, he did put a perspective in place.

"Think about it from the point of view as a strategic investor who is negotiating with Zee. That same strategic investor has the option of having a conversation with lenders and get in a controlling position. There is always that possibility of a strategic investor, whois serious about the acquisition, that he does not have to go via Zee. Of the 22 percent shares the promoters have, about 20 percent is pledged. Hence, their (promoters) controlling stake is going to go down. They have to come to terms with the fact that they will be not in control of the company in the long-term unless they find a solution," said Sinha.

Explaining about the mechanics of the solution, he said: "If somebody would take up their (Zee) debt in a consolidated way, then it would be interesting. A lender would be willing to take a haircut while unloading the stocks. So, they won't be able to recover the full value of the loan. If somebody has confidence in the promoters to let them be in control, do a side deal with them, take over the debt. This could be a rescue plan which could give Zee a new lease of life."

Sinha also pointed out that Comcast had not gone ahead with buying Zee stakes.

Meenakshi Tiwari, forecast analyst at Forrester, thinks that while Zee promoters will lose their control of the company, the partners coming on board would want the help of the current management, especially in the digital business.

The OTT (over the top) platform Zee5 came into existence in 2018 and since then, has managed to get as many as 75 million monthly active users (MAUS) and aims to bring the number up to 100 million MAUS by next March. Also, Zee5 is hoping to meet the break-even target within five years of operations.

While the digital space is critical and any partner would need current management's help in running the OTT business, there is uncertainty regarding Zee5’s business as well. This is because if a global partner comes on board with an existing OTT platform, then Zee5's relevance will be lost.

"The OTT business will go through a lot of change. Zee5 could benefit immensely from a content rich strategic acquirer who comes with their library. Married to their reach, there could be a potent play here," said Sinha.

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First Published on Nov 5, 2019 04:03 pm
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