MUMBAI: 31 July was an extremely busy day for Zee Entertainment Enterprises Ltd (ZEEL) managing director and CEO Punit Goenka. Conference calls with investment analysts followed by video interviews with various business news channels late into the evening. Hardball questions were asked, he parried them with ease. Congratulations poured in and Punit responded to them all.

This was a confident Punit. Not jubilant, but very businesslike. He sounded like a CEO in charge of his company, in control of its future. It appeared like he had finally emerged out of the shadows of his father the highly accomplished Subhash Chandra.

By the end of it all, Punit, as he is known to all of us, understandably sounded tired. But it was a “good” fatigue.

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As committed, he had delivered on his promise to make an announcement before the end of July 2019 about the Essel Group promoter family finding an investor to help them free equity which had been pledged with mutual funds, NBFCs and banks to raise debt to finance their expansion into newer areas.

US-based Invesco Oppenheimer’s – the investor’s  – offer was at Rs 400 per share and it had been holding on to 7.11 per cent of Zeel’s equity since 2002. And the fact that it took up another 11 per cent of the Indian owned global media group for Rs 4244 crore emphasises the confidence it has in the medium to long-term future of Zee as well as the faith it reposes in the ability of Subhash Chandra and his sons Punit and Amit Goenka and the teams within the group to ride over the current storm that it is facing. It has not demanded a board seat and has asked for no changes in the functioning, giving the family total management oversight.

Some industry professionals snickered in private saying the deal is a damp squib. For one, the Zeel team failed in its efforts to get a strategic investor who would bring in global and technical expertise like Punit had proclaimed a few months ago. Second, the pricing of Rs 400 places the valuation of Zeel at about Rs 40,000 crore, which is much lower than what many expected.

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But Punit believes he has got the best deal in place for Zeel. Said he on the investment analysts’ call: “We had a strategic investor’s proposal on the table and the financial investor’s. We opted for the financial investor’s as the strategic investor would have taken time which would have gone beyond the deadline given to our lenders.”

His view is that the valuation is something that can go only up, and even at Rs 400, it is at a premium of the Zee low for 2019.

“The floor price has been laid now,” said Punit. “The next deal will happen much beyond this if it is required.”

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He, however, is sanguine that it will not be needed, as the Essel Group will be lopping off and hawking its non-media assets to cover the gap of Rs 6,800 odd crore.

Punit, though, did not rule out the promoters offering further equity or partnering with other strategic investors in the media and entertainment space going forward.

Other analysts point out pricing aside, the Invesco Oppenheimer deal is a coup for Punit Goenka. For one, it has allowed the management to be in the Indian promoters' hands. And they have been running a tight ship, with EBITDA margins being really healthy for several quarters.

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The second benefit is that acquisition by a strategic investor like Sony or Comcast or Reliance could have led to concentration of power in the hands of one of these three. As a consequence, a reduction in competitive forces in the media and entertainment – more specifically broadcasting – space.

Having cleared the first hurdle of proving the doomsayers wrong, Punit now has to complete the Invesco Oppenheimer transaction, which he says will happen by end-August. (read: Zeel’s Punit Goenka on Oppenheimer divestment)

But the bigger challenge is finding the rest of the Rs 6,756 crore which he has to pay to the Essel Group lenders without divesting any more equity in the media mother ship.

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