Sony may buy 20% stake in Zee; to help company repay its Rs 13,000 crore debt

Japanese electronics and entertainment company Sony Corp may buy 20-25 per cent stake in Zee Entertainment Enterprises Ltd (ZEEL). The Subhash Chandra company has been struggling to raise funds to pay huge debt of over Rs 13,000 crore. Now Chandra wants to sell the company's stake at a premium of 30 per cent, Mint reported. But there's no confirmation on how much stake Chandra wants to retain in the company. Essel Group holds 41.62 per cent stake in Zee but half of the shares are pledged with banks. The daily quoted sources as saying that Chandra was interested in giving away over 20 per cent stake, which could help him pay out the outstanding debt.

The deal could also mark a deeper penetration for the Japanese company's Indian subsidiary into the Indian entertainment space as its market share will see a major rise if the deal materialises. While Sony's India arm operates 26 channels, Zee owns 66 television channels across 171 countries. Buying a stake in Zee could help it increase its market share significantly. More clarity on the possible deal will be revealed in the coming weeks as the deadline to repay the debt is April 2019.

Zee CEO Punit Goenka had earlier ruled out the possibility of an Indian company picking up a stake in Zee, closing the doors for Reliance Industries. Goenka had also hinted that the company was in talks with several international companies, including Comcast and Tencent. Comcast had indeed been evaluating the Indian market for a while, but it is in huge debts and analysts feel that it is unlikely to be in the race.

When the Zee promoters announced their intent to sell 50 per cent of their stake to a strategic partner in November 2018, the analyst community was confident that by virtue of being the most profitable media company, it would command a huge premium. However, in light of the current crisis, it may not be able to command the premium it desires. In fact, Goenka had earlier admitted that the crisis would give a reason for the potential buyers to negotiate.

Edited by Manoj Sharma

Also read: Lenders grant Essel Group till September to clear its debt

Essel Group has to be crystal clear about its intent, else it could run into the risk of severe brand erosion