InvestorQ : Why is Zee group promoter selling his entire stake in the company and what does it mean for the stock price?
Sam Eswaran made post

Why is Zee group promoter selling his entire stake in the company and what does it mean for the stock price?

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swati Bakhda answered.
3 years ago
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The stock price of Zee was up by 10% on 20th November and one of the main reason was the decision of the promoters to sell their 16.5% stake in the group to repay their debts in totality. Here is what you need to know about the Zee episode.

· Subhash Chandra, the founder and chairman of the Essel group, proposes to sell 16.5% stake in flagship ZEE Entertainment to meet repayment obligations. This includes a planned 2.3% stake sale, part of an earlier tranche to be sold to OFI Global China Fund, which not yet completed.

· Earlier in July, the Essel group had announced that it would sell 11% stake in ZEEL to Invesco Oppenheimer Developing Markets Fund for Rs.4,224 crore. Of this, 8.7% has been sold to OFI Global China Fund and the balance 2.3% is pending. The 16.5% stake includes this 2.3% stake too.

· The balance 14.2% stake will be sold through a mix of off-market and on-market deals and the entire transaction is expected to be closed before 23rd November.

· Once this transaction is completed, the overall holdings of the Essel group (Subhash Chandra) in ZEEL will be just about 5%, of which 1.1% will be encumbered. This is in line with the promise made by Chandra to the creditors of the group. The 1.1% will be the pledged holdings and that means most of the current selling is happening on the encumbered shares of Zee.

This would effectively mean that Zee promoters, Subhash Chandra, will virtually become minority shareholders in the business they had promoted nearly 30 years back. This would also hopefully put an end to the problems of mutual funds lending to the Essel group in the form of securities, backed by a pledge of promoter holdings.

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