The Essel Group, which on November 13 announced its decision to sell up to 50 percent of its holding in Zee Entertainment Enterprises, may be open for a full exit.
Essel Group is contemplating divesting its holding to a 'strategic global media-tech player,' and expects an outcome by April 2019.
Speaking to CNBC-TV18, Punit Goenka, Chief Executive officer of Zee Entertainment Enterprises said the company wants to transform into a tech-media-company focusing on VR, AR IoT and 3D printing.
“We are looking at a global strategic partner who can come at parent level or at a subsidiary level and help us achieve our global ambition,” he said.
However, brand strategists do not rule out the possibility of a hidden message in the move.
“When a company is preparing for this level of growth they generally keep it under wraps but Essel has grabbed a lot of limelight by making the news public in a big way. The association of Goldman Sachs also gives the company some global attention," said Saurabh Uboweja, International Brand Expert and CEO, Brands of Desire, a Delhi-based management consulting firm.
"To my understanding, this could be an attempt to increase their market cap by at least 20 percent to 30 percent and take it to at least $7 -7.5 billion and monetise their holdings. The hidden message in the whole announcement could also be that they at exploring a full exit,” added Uboweja.
In the interview, Goenka said the company is open to sell more than 50 percent of the promoter stake if the partner demands.
The prospective buyers
A Motilal Oswal report said potential players in the media-tech industry could be global/Indian e-commerce players or telecom operators.
“We are unsure if the intention to sell the stake is purely to improve technological capability, as the motive could have also been achieved via acquisition – given its strong cash position or by raising equity in the company to incur investment,” said the report.
"Indian telecom companies who are looking at strengthening their content offering could be probable buyers. Global players who already have operations in content and who are excited about an India opportunity can cash on the partnership with Essel Group," Uboweja added.
As per the Motilal Oswal report, Essel's move could help capitalise on the changing video consumption trends and transform itself into a global media-tech player.
Another report by Edelweiss Securities said Zee’s intent is to be at par with other global media players in coming years, particularly in terms of media technology. Moreover, this decision identifies and addresses the issues of high leverage at the promoter group, which has been a key investor concern.