What Brokerages Make Of Zee Entertainment Promoters’ Stake Sale Plan

Shares of Zee Entertainment Enterprises Ltd. jumped the most in a month after the promoters announced their plan to sell up to half their stake in India’s largest broadcaster by market value.

JPMorgan, in a research note, said it’s a positive development and could bring in a large global strategic partner. “The promoters’ plans to divest stakes will leverage its content strength to transform into a tech-media company.”

Macquarie and Morgan Stanley said a global strategic partner could help Zee Entertainment plug gaps in its technology and achieve leadership. They also sounded caution though. The plan raises questions about the longevity of the business, according to Macquarie. It requires significant investments and time to reach leadership, said Morgan Stanley.

Subhash Chandra’s Essel Group holds 41.62 percent stake in Zee Entertainment worth Rs 17,513.5 crore. More than half the promoter holding is pledged, amounting to a 24 percent stake in the company, according to the data available on the exchanges.

Shares of Zee Entertainment parred early loses and rose as much as 7.3 percent, the most in over a month, to Rs 470 apiece today.

Here’s what brokerages had to say about the potential sale:

Macquarie

• Maintained ‘Outperform’ with a 12-month price target of Rs 556—an upside of 26.9 percent from the last regular trade.
• Expect a large global strategic partner to enter India media/content opportunity.
• The deal could help plug gaps in ZEE’s media-tech prowess.
• The deal raises concerns on promoters’ view on the longevity of the company’s business model.

JPMorgan

• Maintained ‘Neutral’ with a price target of Rs 530, an upside of 20.9 percent from the last regular trade
• Strategically positive development.
• Will allow Zee to leverage its content strength to transform into a tech-media company.
• Induction of global partner to address investor concerns of Zee’s ability to be well positioned in changing media landscape.

Morgan Stanley

• Maintained ‘Underweight’ with a price target of Rs 410, a downside of 6.4 percent from the last regular trade.
• Any strategic partner that will invest would like to have significant control.
• The possibility of an open offer cannot be completely ruled out.
• A right strategic partner could help Zee to achieve leadership.
• The path to leadership is long and time-consuming and requires significant investments.