Shares of Zee Entertainment Enterprises (ZEEL) slipped 9 percent in the morning trade on November 26 following the resignations of chairman Subhash Chandra and other senior officials. The stock hits a low of Rs 312.40 on the early trade on Tuesday, from its previous closing of Rs 343.80 on NSE. The stock surged nearly 36 percent in last three months after the promoter – Essel Group sold a major part of its pledged stake in the company.
Subhash Chandra, who founded the business three decades ago, has stepped down as chairman of the board at the company on Monday. Chandra will continue be non-executive director and ‘mentor’ to management.
The company has also reconstituted its board, appointing three new independent directors ? former IAS officer R Gopalan, retired IPS officer Surendra Singh, and art collector Aparajita Jain. The reconstituted board consists of six independent directors and two members from Essel Group.
Chandra?s decision was in keeping with rules mandated by the Securities and Exchange Board of India (Sebi), which says the chairman cannot be related to the managing director (MD) and chief executive officer (CEO) of a company from April 2020.
On November 5, Chandra?s son, Punit Goenka, was reappointed as MD and CEO of Zee, a position he has held since January 1, 2010. The reappointment is effective from January next year.
Last week a total of 16.5 per cent of the promoters? stake was sold to investors. Financial investors, including GIC, BlackRock, HSBC Global, Fidelity India, SBI Mutual Fund and Reliance Mutual Fund, brought 15.7 per cent of the promoter?s stake in Zee for Rs 4,343.18 crores and additional amount of nearly Rs 427 crore was raised through off-market transactions, taking the total to Rs 4,770 crore. A total of 16.5 per cent of the promoters? stake was sold to investors.
In September, Invesco Oppenheimer, an existing investor in Zee, had picked up 11 per cent stake in the company for Rs 4,224 crore, taking its total shareholding to 18.74 per cent. With the money the company retired debt worth Rs 4,000 crore.
Sale of Essel Group’s 16.5 percent stake in ZEE to financial investors has largely eased promoter leverage concerns, a key overhang. After this transaction, promoter stake has dropped to around five percent and pledged shareholding fell to 1.1 percent. The proceeds (about Rs 4,800 crore) from this stake sale would reduce promoter loan-against-share (LAS) to about Rs 2,300-2,500 crore from Rs 7,000-7,200 crore. The promoters intend to monetise other group assets to repay residual loan against shares (LAS) liability.
After the de-leveraging and reconstitution of board, the company will be track on its business, but the major concern includes the deceleration in advertising revenue in near
term as amid continued macro-led weakness in consumption, and its viewership market share has declined from its peak in the second half of FY19 led by some weakness in the ratings of Zee TV, Zee Telugu and FTA channels.