Lenders give Essel more time to repay debt

In a temporary reprieve to the Mumbai-based Essel Group, lenders to the business house–with interests from broadcast television to roads and renewable energy–have unanimously agreed to extend the timeline for debt repayment “enabling the group to optimise the value output from the sale of its assets.”

The Essel Group, led by media baron Subhash Chandra, needed to repay lenders including some of India’s top mutual funds, around ₹7,500 crore by September 30. Out of this, the group will repay a significant portion from the proceeds of an 11% stake sale in its flagship company Zee Entertainment Enterprises. In August, the promoters of Zee agreed to sell an 11% stake to an existing investor in the company, Invesco Oppenheimer Developing Markets Fund, for ₹4,224 crore.

The business house, which has blamed adverse business conditions and the liquidity crunch in the NBFC (non-banking financial companies) sector following the crisis at Infrastructure Leasing and Financial Services (IL&FS) for its inability to repay debt, needs to further monetise assets to repay lenders. But a distress sale of assets in a depressed market may not fetch adequate valuation, the company fears.

“The lenders have extended complete support to the Group and its promoters, recognizing the intrinsic value of the assets and the overall asset divestment process undertaken. The Group remains confident on further divestments including its non-media assets,” the company said in a statement issued on Wednesday. The statement didn’t elaborate on the quantum of extension received from lenders.

On August 29, the Essel Group also announced a deal to sell 205 MW of renewable energy assets to Adani Green Energy at an enterprise value of ₹1,300 crore. However, there is another 480 MW of clean energy assets in Essel’s portfolio and the group is holding out for a better deal before proceeding with the divestment of these assets. The company is also in talks with potential suitors for its road assets.

Essel’s promoters have kept their option of selling an additional stake in Zee open, in case the proceeds from the sale of non-media assets aren’t enough to cover the group’s debt burden. The challenge, however, is that the deal with Invesco was struck at a valuation of around ₹400 per share. And Zee’s share price has since tanked to ₹271.90 per share, the stock’s closing price on the BSE on Wednesday.

Uncertainty that loomed large over the last few weeks on whether lenders will allow Essel a time extension to repay debt roiled the company’s share price, at a time when the broader markets have also come under pressure. Zee’s share price has declined over 25% in the last one month alone.