Are satellite televisions losing their relevance in the FANG (Facebook, Amazon, Netflix and Google) world?

When the promoter group of one of India’s leading satellite broadcasting companies thinks of offloading half of its stake, it becomes a sneak peeking opportunity.

As you might be aware, the news of The Essel Group divesting upto 50% of its stake in Zee Entertainment Enterprises Limited (ZEEL) has been making headlines. Usually, divestment by the promoter group is considered a negative development in the stock markets.

At present, the Essel Group holds a 41.6% stake in ZEEL. The market value of Essel’s stake in ZEEL is Rs 17,350 crore. In other words, the potential stake sale might fetch Rs 8,675 crore to the Essel Group.

Why is the promoter of ZEEL divesting?

To put an end at all speculations pertaining to the divestment news in the media, the management of ZEEL issued a clarification through a conference call conducted for all stakeholders.

By offloading upto 50% of its stake in the company, the Essel Group hopes to clinch a win-win deal for all—ZEEL, the promoters of ZEEL, shareholders of ZEEL and also for the strategic partner it intends to rope in (to buy the stake).

What does it mean for the company?

Against the backdrop of the telecom-media-technology convergence revolution and the proliferation of video-sharing sites and apps, the media and entertainment space is getting redefined.

The promoter of ZEEL is keen on finding a strategic partner who could help ZEEL expand its global footprint (beyond South Asia) and address the investment needs of the business that requires a substantial technology uplift with a futuristic bias.

What does it mean to the promoter?

The promoter group has made some strategic investments in the infrastructure space. The urgency to divest in ZEEL is to pare the debt of one of the Essel Group companies, viz. Essel Infrastructure—an unlisted company.

What does it mean for ZEEL shareholders?

At present, it’s difficult to predict. The strategic plan and scope of investments are expected to crystalise by March 2019, based on mutual agreement between the promoter of ZEEL and the ‘selected’ strategic partner. In other words, the futuristic global plans may either entail a longer gestation for ZEEL shareholders or may be housed outside of ZEEL.

Overall, shareholders clearly have a short-term period of uncertainty to ride through.

 

Disclaimer: Ventura Securities Ltd has taken due care and caution in compilation of data for its web blog. Information has been obtained from different sources which it considers reliable. However, Ventura Securities Ltd does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Ventura Securities Ltd especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its web blog. The information provided herein is just for the knowledge purpose and shouldn’t be construed as investment advice under any circumstances.

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