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Essel Group pays mutual funds nearly Rs 2,000 crore

FE Bureau
The Essel Group had entered into an agreement to sell up to 11% promoter stake in ZEEL to Invesco Oppenheimer Developing Markets Fund

Mutual funds that had lent to the Essel Group against shares can breathe a sigh of relief as several funds have received the first tranche of the payout from the Group.

On Tuesday, the Zee group announced that it has successfully completed the first tranche of Zee Entertainment (ZEEL) stake sale to Invesco Oppenheimer Developing Markets Fund.

Sources in several MFs told FE that they had received nearly Rs 2,000 crore from the Zee group on Tuesday. Fund houses are hopeful that the remaining amount would be paid before the end of September - the time given to Zee group to repay the money.

The Essel Group had entered into an agreement to sell up to 11% promoter stake in ZEEL to Invesco Oppenheimer Developing Markets Fund.

Sources in the industry say Aditya Birla Sun Life AMC received Rs 765 crore, HDFC AMC got Rs 580 crore, ICICI Prudential AMC and Kotak Mahindra AMC received Rs 434 crore and Rs 208 crore, respectively.

A Balasubramanian, CEO, Aditya Birla Sun Life AMC, said, "Aditya Birla Sun Life AMC has received Rs 765 crore and with this payment, our exposure to Zee's loans against share (LAS) share will get reduced to roughly Rs 950 crore. Zee has paid around 50% money to fund houses and we are hopeful that balance amount will come once other transactions will complete."

The data from Value Research show that mutual funds collectively hold Rs 5,220 crore as on June 2019. Another senior official from the leading fund house who received the money from Zee group, on condition of anonymity, said, "We have received around 50% of the money and Zee management has indicated that they will pay the remaining amount by the end of September. As of now, no decision has been taken on future action if the Zee group fails to pay the remaining amount by the end of this month."

In January this year, the share price of Zee Entertainment Enterprises and Dish TV fell sharply in the range of 26-33% primarily on reports of pledged shares of promoters being invoked and sold. Several MFs had invested in the debt instruments of Essel's infrastructure projects and are holding shares of Zee Entertainment and its subsidiaries as collateral. This resulted in security cover against exposures falling below the prescribed threshold as per the NCD documents. For several infra projects the promoter has stood as guarantor and provided collateral in the form of shares. However, the promoters conveyed their inability to provide additional equity shares as most of their domestic shareholding was already pledged. Lenders had granted the Essel Group companies a moratorium till around September 2019 by which time fund houses expect the repayments.

In a press release on Tuesday, Essel Group said, "The Group wishes to confirm that the 1st tranche of the transaction comprising sale of 8.7% stake in ZEEL has been successfully concluded today. The Group is confident of completing the balance sale of 2.3% stake over the next few days. The Group is working towards timely completion of operational formalities in order to conclude the entire transaction at the earliest," said press release from Essel Group.