Zee Entertainment’s strategic sale likely to be at premium, says CLSA


The strategic stake sale of Zee Entertainment Enterpriseswill likely be at a premium and may not see any management change post sale, said CLSA.

The foreign brokerage has retained a buy rating on the stock with a target price of Rs 670 as the stock is trading at a 15 per cent discount to 10-year average valuations.

Zee’s stock has rallied nearly 50 per cent since the January 2019 lows due to a potential strategic stake sale by promoters which will help the Essel Group deleverage.

“This rally will also reduce the risk of further invocation of pledges by lenders and will help promoters sell a lower stake. Further, a blue sky for minority shareholders would be no change in Zee’s core management team and arm’s length business dealing with new partner,” said CLSA.

In a scenario that promoters would look to repay at least 80 per cent of Rs 13,500 crore loan against shares via the strategic stake sale, Essel Group will have to sell at least 20 per cent stake in Zee, said CLSA. However, given that a premium is likely, in case transaction takes place at 20 per cent premium to current market price, promoters could pay off entire loan against shares by selling 25 per cent stake in Zee, it added.