Zee on Thursday
reported a 75 percent jump in profit to 5.6 billion rupees on sales of 21.7
billion rupees for the December quarter.
Subhash Chandra started Zee in 1992
Media
tycoon #SubhashChandra scrambled over the weekend to stem a crisis that wiped
$1.6 billion off his flagship #Zee Entertainment Enterprises Ltd.'s market value
on Friday and threatened to derail his plans to sell a stake in the company.
Shares of India's biggest television network and group company #Dish TV India Ltd. plunged more than 25 percent in the last two hours of
trading after news website The Wire published a report alleging that companies
linked to Chandra were involved in fraud and money laundering. The group
released statements on Friday and Sunday denying the allegation.
On
Friday, Zee's Chief Executive Officer Punit Goenka told investors on a call
that the share plunge won't hit Chandra's plans to sell half of his stake in
Zee. Chandra, 68, later that evening issued an open letter blaming poor
investments in the infrastructure sector combined with its exposure to the
failed lender Infrastructure Leasing & Financial Services Ltd. for the
group's rising debt and apologized to his investors and creditors for the
conglomerate's financial woes.
Chandra,
who started Zee in 1992, is seeking a strategic investor to help him fend off
competition from Netflix Inc., Amazon.com Inc. and hundreds of local TV
channels vying to tap India's booming demand for content. Plunging shares may
hinder those plans and his attempts at reducing debt. Goenka sought to ease
concerns by saying that Zee is also trying to sell stressed assets for an
enterprise value of Rs. 20,000
crore ($2.8 billion).
"There's
no change to business fundamentals," Kapil Singh and Siddhartha Bera,
analysts at Nomura Holdings Inc. in Mumbai wrote in a report Saturday. Zee
trades at a "very attractive" valuation, they said, maintaining their
buy recommendation on the stock.
Zee is
close to selling an infrastructure asset and expects to complete the sale of
road and solar power projects by April, Goenka said. Zee's owners have pledged
59 percent of their shares to lenders as collateral, and the asset sales may
help them revoke the pledges.
Friday's
slump may have "exacerbated risk of pledges being invoked," CLSA
analysts Deepti Chaturvedi and Akshat Agarwal wrote, while also recommending
clients buy the shares.
Zee on
Thursday reported a 75 percent jump in profit to Rs. 560 crore on sales of Rs. 2,170
crore for the December quarter.
Chandra,
a former rice trader, in his letter urged lenders to "maintain patience,
till the process of Zee Entertainment's stake sale is completed."
"Post the sale process, we will be positively able to repay the entire
dues, but if the lenders react in a panic situation, it will only hurt them and
us."
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