Reliance Jio is likely to enter the fray to buy half of promoter Subhash Chandra’s stake in Zee Entertainment Enterprises (ZEEL) said sources, pitting it against international names such as Amazon, Apple, Tencent, and Alibaba, who are interested as well. Some of the other names doing the rounds include AT&T, Singtel, Comcast, and Sony Pictures.
In November 2018, the ZEEL promoters had said they would divest up to 50 percent of their stake (41 percent) to the “right global strategic partner”, which would help in transforming ZEEL and maximize long-term value.
The promoters have now widened the ambit to include domestic investors too. ZEEL’s MD & CEO Punit Goenka, in an analysts’ call on Friday, said they were talking to multiple potential partners and that a deal could be announced: “in the next few weeks”.
“Our preference would be an international player because it will give us the global exposure we are seeking, especially to markets such as Europe and the US. Having said that, we have opened the stake-sale process to all, domestic as well as international companies,” Goenka said.
Reliance Industries (RIL) Chairman Mukesh Ambani has made acquisitions in the media and entertainment space, with the acquisition of 75 per cent stake in Network18, which has a presence in a number of areas, including news (CNN-News18 and CNBC-TV18), entertainment (Viacom18), distribution, motion picture production (Viacom18 Motion Pictures), digital and publishing across Hindi, English, and several Indian languages. In July 2017, RIL had bought 24.9 percent in content production house Balaji Telefilms, which also has the over-the-top (OTT) app ALTBalaji. Jio is a subsidiary of RIL. RIL, said experts, would be able to consolidate its presence in the OTT and broadcasting space, with an investment in ZEEL. ZEEL’s content can also feed its OTT apps such as JioTV and JioCinema.
According to a recent report by Delhi-based consultancy KalaGato, JioTV ranks second in terms of share of active users (on an OTT platform) at nearly 18 percent, behind Hotstar which has 40 percent share. Zee5 has 15 percent share of active users. Voot (Viacom18) has nearly 12 percent share of the market.
In 2018, Network18-owned TV18 had raised its stake in its joint venture (JV) with the US-based Viacom to 51 percent, taking operational control of the JV Viacom18, which runs the Colors channel, among others.
The 26 percent fall in the ZEEL stock on Friday could result in promoters Subhash Chandra and family – walking away with a smaller payout for their stake in the company. Chandra and his family are looking to offload up to 20 percent stake in the company, of the total 41 percent they hold, to a strategic investor.
The sale price (of the 20 percent stake) could hover in the region of Rs 7,000 crore, said analysts, 30 percent below its valuation of Rs 10,000 crore in December, when the stock had crossed Rs 500 after news of the stake sale. In response to a mail on its interest in the stake-sale process, an RIL spokesperson said that it could not comment on media speculation. ZEEL spokesperson said, “At this stage, we do not wish to comment on the name of the prospective partner.”
Content is a key part of Ambani’s strategy along with commerce to add value to Jio consumers. “Our digital connectivity platform has served as the foundation on which we are building our media and entertainment, education, health care, and agriculture platforms,” Ambani had said in the 2018 annual general meeting. “Each of these will create significant shareholder value and enormous societal value,” Ambani said. For Amazon, investing in ZEEL, said sources, will mean greater access to OTT subscribers via Zee5. The KalaGato report pegs Amazon Prime Video and Netflix’s share of active users at 1.43 percent and 2 percent, respectively.
Karan Taurani, vice-president-research analyst, Elara Capital, says, “The promoters’ decision to consider a stake sale in ZEEL was necessitated owing to rapid changes in the digital broadcast landscape. The OTT space has emerged quickly in the last few years, prompting ZEEL to not only invest in the segment but also seek a strategic partner who can help strengthen its position in the area. At the same time, the investor will get access to a company, which is a key player in the Indian broadcasting space.”―Business Standard