Dr Subhash Chandra reveals Rs 2,200-crore investment plan; promoter holding to rise over 18%

Dr Subhash Chandra Exclusive Interview: Zee Entertainment Enterprises Ltd (ZEEL) Founder and Chairman Emeritus Dr Subhash Chandra revealed in an exclusive interview that the company board has approved a massive investment of Rs 2,237 crores (approx. $262 million) by the promoters. Dr Chandra said that the promoter stake will increase to 18.39 per cent and this will in turn boost investors’ confidence. ZEEL’s promoter shareholding stood at 3.99 per cent, as of March 31.
Dr Chandra also shared future mega plans and recalled the difficult period when the promoter stake had to be sold after the company failed to repay debt.

Dr Chandra further said in the exclusive interview with Zee Business Managing Editor Anil Singhvi that the promoter’s decision to invest Rs 2,237 crores (approximately $262 million) in the company is proof of his unwavering commitment to the company and its shareholders.

Past struggle and resolve to repay debt

Dr Chandra recalled the period when he first failed to fulfill his commitment to the financial markets on January 25, 2019, and had to sell a 44 per cent stake in ZEE to pay off debt of over Rs 40,000 crore (approx. $4.7 billion). The sale brought the promoters’ stake in ZEE down to just 4 per cent.

The chairman emeritus admitted that the group’s other troubles, especially the mistakes in the infrastructure business, also affected ZEE Entertainment.

“The infrastructure business was a big mistake, which was handed over to the wrong people,” he said, adding that after paying off the debt, he is now putting the recovery amount back into the company.

Booster dose of Rs 2,237 crore

The board of ZEE recently took a historic decision, on JP Morgan’s advice, and approved the issuance of 16,95,03,400 convertible warrants to the promoter group.

The promoter group will invest a total of Rs 22,37,44,48,800 in the company, and after this investment, the total stake of promoters will increase to 18.39 per cent.

Dr Chandra revealed that the most encouraging thing about this deal is that the promoters are buying shares at a price of Rs 132 per warrant, which is more than the regulatory price (Rs 128.58).

This is the biggest proof of how much confidence they have in the future of the company, Dr Chandra said.

‘Double benefit’ for shareholders

The increased promoter holding will benefit the shareholders and result in a ‘double benefit’ for them. Firstly, the shareholders were uncomfortable with the promoter’s holding of only a 4 per cent stake in a large and complex business like ZEE, and so an increase in the promoters’ stake will boost investors’ confidence.

Secondly, the infusion of Rs 2,237 crore (approx. $262 million) will act as a ‘booster dose’ for the company and give momentum to growth.

This money will be used mainly for growth in content and technology, strengthening the balance sheet, and rapid implementation of the strategic growth plan, thereby putting the company in a better position to compete with big competitors like Reliance and Disney, Dr Chandra said.

What’s the roadmap for the future?

Dr Chandra said that there is still money to be paid in some accounts, which is being paid on the due date. Besides, money for infrastructure is pending with the state governments.

The board believes that the promoters will be more motivated for the growth of the company as their stake increases in it, and this investment will put ZEE in a good position for the future, Dr Chandra said.

When the owners are themselves increasing their stake by investing thousands of crores, and that too at a price higher than the market price, it shows that they expect tremendous growth in the future, said Dr Chandra.

This will also increase the confidence of investors in the market and can have a direct impact on the performance of the stock in the coming days, he said.

ZEEL share price climbs

On Thursday, the stock of ZEEL was trading at Rs 144 with a gain of about 2 per cent. In the last one month, the stock has gained 10 per cent after rising 14 per cent in the last 6 months. This year the stock has jumped 16 per cent so far.