Zee Entertainment extends gain after promoter's stake sale

Shares of Zee Entertainment Enterprises (ZEEL) were up 5 per cent to Rs 363 on Friday, extending its previous day’s 12 per cent rally on the National Stock Exchange (NSE), after the promoters offloaded around 16 per cent stake in the company via open market on Thursday.

In the past three trading days, the stock of ZEEL has rallied 27 per cent, as compared to a 0.25 per cent decline in the Nifty 50 index. A combined 50 million shares changed hands on the counter on the NSE and BSE till 01:20 pm.

On Wednesday, Essel Group said it was planning to sell around 16.5 per cent stake in ZEEL to financial investors, in order to repay loan obligations to certain lenders of the Group for whose benefit such shares are currently encumbered (and who have consented to such share sale by the Group).

Promoter ESSEL Media Ventures sold 69.4 million shares while Cyquator Media Services sold 61.6 million shares and ESSEL Corporate LLP sold 11.8 million shares via bulk deals at an average price of Rs 304 per share, the NSE data shows.

Government of Singapore bought 28.5 million shares, representing 3 per cent stake, while Societe Generale bought 16.7 million shares or 1.73 per cent stake in ZEEL, data shows.

Post transaction, most of the brokerages have upgraded the stock as they believe the deal removes the pledge overhang while also ensuring the continuation of the current management team.

“We see this as two-fold positive for the company. This should enable to resolve a large portion of group’s debt concerns. Trailing 12-month uncertainty of overhang of stock-supply and uncertainty diminishes. The continuity of existing and efficient management viz. Puneet Goenka as MD & CEO, though with reduced stake of around 5 per cent with 1.1 per cent encumbered,” analysts at Dolat Capital said in a company update.

“The transaction removes the overhang on the company that had impacted the stock, which is down around 22 per cent since the time promoters stated their intention to sell a part of their stake despite the run up after the announcement of the stake sale. Operating performance and balance sheet improvement are key for re-rating in the near term,” analysts at Emkay Global Financial Services said in a company update.