After weeks of denial, Subhash Chandra, chairman of the Zee group, has finally admitted that Zee Telefilms is planning to induct a strategic partner who is likely to be an international media major. This comes close on the heels of its proposed ADR issue not taking off.
According to Mr Chandra, the induction of the strategic partner is being done to achieve faster growth and make its Zee Network a truly global entity. He believes that the induction of the international partner would help enhance shareholder wealth as well as increase enterprise value. He also stated that, while representing a departure from its earlier policies, this move was in line with international trends and was keeping in mind the global media scene.
It is understood that the incoming international partner will have synergies with Zee Network and would help distribute Zee's products globally, besides giving it technological impetus and access to capital markets.
The company is in the process of appointing an investment banker for this purpose and it is expected that the entire exercise of inducting the partner would be completed in the next three to four months. The induction could be through issue of additional shares in the company or through divestment of stake by the promoters. As per the latest shareholding pattern, promoters hold 60 per cent of the equity of the company, 19 per cent is held by the FIIs, 7 per cent by the Indian financial institutions, 3.8 per cent to 4 per cent by Star and the rest by the public.
Replying to a question raised by domain-b, Mr Chandra said the incoming partner could also be Sony or Star. "There are no permanent enemies in this business", he said.
Earlier R K Singh, chief executive officer, Zee Network, pointed that the growth of the media industry in South Asia had been pioneered by Zee, which today is the ninth most well known brands in the country. He said so far Zee had grown in an organic manner, giving the option to its viewers to watch its bouquet of 13 channels but this had to change.
Mr Singh said, "It takes two to tango. Global trends in media and entertainment industry suggest that partnerships that provide access to technology and capital with access to global markets for programming syndication / distribution, can enhance the process of value creation by enlarging the scope of operating markets and consumers." Mr Singh also pointed out that the South Asian region is one of the fastest growing regions in the world and the need and appetite for entertainment products was growing. He said, "Zee Telefilms Ltd is perfectly poised to command a lions share of this growth so long as the appropriate access to technology, finance and distribution is reinforced."
Earlier, Mr Chandra had repeatedly denied the possibility of his divesting his stake in Zee Telefilms, saying that the time was not ripe for selling equity. He obviously had the Zee scrip in mind, which had fell almost 90 per cent from its all time high of Rs 1,640 in February 2000. According to market watchers, the wily and astute Mr Chandra could well have struck a deal, or be close to striking one, at a price which is much higher than the current ruling Zee share price.
When told by domain-B that the intrinsic worth of the company stood at Rs 3,500 crore as on 31 March 2000, Rajesh Jain, president corporate finance and strategy and Mr Singh, agreed that the prevailing market price, a function of sentiments, was not truly indicative of company's intrinsic worth.
The company also claimed that Zee network continued to be the number one television network in India enjoying a viewership share of 24 per cent in the Hindi belt. According to Sandeep Goyal, group chief executive for broadcasting, said that Zee TV enjoyed a 48 per cent share of viewership in the female 25 plus category during the core prime time slot of 7.30 p.m. to 9.30 p.m. hours. He said Zee Cinema enjoyed 55 per cent share of cinema audiences, with Alpha Marathi garnering almost 50 per cent share of Marathi channel viewership.