ZEE denies plans by lenders to sell stake

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26 Aug, 2025 12:21

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In a statement to the BSE on November 4, Zee Entertainment has denied rumours about stake sale by lenders.

Refuting a report by the Business Standard, the company said that the promoters had denied the speculation about the transfer of the promoters' shares to escrow accounts.

Lenders typically put shares in escrow accounts before a stake sale. An escrow account is an account held by a third party during a transaction between two parties.

Another report by The Economic Times hinted at the stake by VTB Capital, the investment management arm of Russia’s state-run financial services giant VTB Group.

For the stake sale, VTB has brought on board global advisors including JP Morgan and Citi, according the report.

Talking to Moneycontrol, Utkarsh Sinha, Managing Director of Bexley Advisors, a boutique investment bank, gave a break-up of the current pie of Zee stakes.

He said the promoters' share was 22.37 percent at the end of September, of which 96 percent was pledged to lenders.

"VTB has 11.66 percent. If the stake sale goes through then the Zee promoters will be left with less than half of what they had started off which is 10-11 percent of that eight to nine percent is pledged with Indian lenders," he explained.

He also thinks that there is a likelihood of VTB Capital selling pledged shares prompting the Indian lenders to follow suit. In that case, the promoters will be left with around two percent of Zee Entertainment.

This would be a letdown for Zee as Punit Goenka, MD and CEO, Zee Entertainment,  said in an investor call on October 5 that there was no risk of VTB sale.

In addition, the lenders had given a six months extension to Essel group, owner of Zee, to repay dues in October.

In case VTB decides to sale its stake in Zee, here is what will happen.

“If there is significant interest from a serious strategic investor to acquire controlling shares of the company, the other lenders may want to hold out to get maximum value for their pledged shares," said Sinha.

'If on the other hand, there is a feeling among the lenders that the offers for VTB are not likely to be serious, that might push them instead to also unload into the market as quickly as possible, driving down prices in Zee further and possibly irreparably harming the prospects of the company,” he added.

He added that there are two things that may make the prices not go down. “If the market feels that the promoter stake going down is a good thing. Or if there is news that it (Zee stake) is going to strategic. If that happens then the prices will go up and this will hold the interest of others who will try and get the maximum value from it,” said Sinha.

When it comes to analysts, they are bullish about Zee because “they were confident that Zee would resolve the debt issue in six months. However, if that evaporates then the whole bullishness also evaporates. There remains big uncertainty right now,” according to Sinha.

Nonetheless, the assets of Zee still remain fundamentally strong from an operational perspective as the company is on strong footing.

"These are capital structure issues, and it is unfortunate that they have not been more proactively handled. If they are, even at this stage, Zee can come out on the other side with a strong future. If a fear based mentality prevails, however, it would be a most unfortunate run on the stock of a company with strong potential,” said Sinha.