Zee promoters pump in cash to avoid capital loss

The promoters of Zee Entertainment Enterprises have ring-fenced the media and entertainment company by replenishing ~200 crore in order to cushion capital loss.

The Subhash Chandra family made the move despite the fact that it is in a financial crunch, say sources in the company.

Zee, in a concall on Thursday, pointed out the company had a fixed deposit (FD) of ~200 crore with a bank. But the bank broke the FD, which was maturing on September 10, prematurely and unilaterally to clear the dues of related parties.

Managing Director Punit Goenka on Thursday in a concall after the quarterly results said the company was thinking of action, as well as compliance with statutory and legal requirements.

Zee missed analysts’ expectations when in its Q2 results (June-September quarter) it announced that it was providing for inter-corporate deposits (ICDS) of ~170. 62 crore. As a result, the company’s profit after tax fell by 22 per cent year-on-year to ~504 crore and it said the write-off of the ICD was being reported due to related parties delaying payment.

With 90 per cent of the promoters’ stake (of their 22 per cent in Zee) pledged to financial institutions, defaults on ICDS have had an adverse impact on the company’s share price, which fell by 5.58 per cent on Friday to close at ~249.70.

The promoters had earlier sold their 11 per cent stake in Zee to Oppenheimer to repay a substantial portion of their ~11,000 crore debt.

The promoters have pledged about 10.71 per cent of the 22 per cent to VTB Capital against loans. Speculation is rife that the Russian company might look at invoking the pledge, which would make the promoters minority shareholders in the company. But the promoters have said they are in talks with VTB on the pledged shares.

The Essel group has been looking at divesting its core non-media assets to repay part its debt, which stands at around ~5,400 crore, to mutual funds after they struck a deal to sell some of their solar assets to the Adanis for ~1,300 crore. Recently, it added in Zee Learn, in which the promoters control 57.18 per cent, which is also on the block.

Zee had a fixed deposit of ~200 cr with a bank. But the bank broke the FD, which was maturing on September 10, prematurely and unilaterally to clear the dues of related parties