Public shareholders, including mutual funds (MFs) and foreign portfolio investors (FPIs), have been hit hard by the crash in stock prices of Zee group companies. Panicky MFs met with the officials of the beleaguered group on Saturday to take stock of the situation, said sources.
Domestic fund houses have high exposure to the group companies both on the equity as well as debt side.
Flagship group company Zee Entertainment Enterprises, part of the benchmark Nifty index, has MF equity holding of Rs 1,850 crore, while FPI holding of over Rs 12,700 crore, an analysis of shareholding data shows. More importantly, debt MFs have exposure of nearly Rs 7,300 crore to Zee Entertainment.
The investments have landed in a tricky spot after nearly a third of the value of the stock evaporated on Friday. The woes have got exacerbated after Zee group chairman Subhash Chandra, in an open letter, expressed difficulties in repaying its lenders amid sharp sell-off in the seven listed firms belonging to the Zee group.
“I am compelled to apologize to our bankers, NBFCs and mutual funds, since I believe that I have not lived up to their expectations, despite the best of my intentions,” Chandra wrote in the letter.
Immediately after the letter, MFs sought a meeting with Zee group.
“Zee being a Nifty company, almost all MFs have exposure to the stock. We are more worried about our debt exposure. The meeting was to discuss the group’s position,” said a fund manager.
Debt funds have exposure of Rs 7,300 crore to Zee Entertainment papers. Aditya Birla MF, HDFC MF, Franklin Templeton MF and ICICI Prudential MF have the highest exposure. Sources say Aditya Birla MF has the highest exposure worth Rs 1,500 crore. Other aforementioned fund houses also have exposure of more than Rs 500 crore each.
Sources say most of this exposure is in the form of loan against share.
“While the debt exposure is indeed high, it is in the form of loan against share. In case the group is not able to repay, we have to option to invoke and sell the shares. As of now the cover is sufficient, however, if the group stock tumble further, it could lead to a problem,” said another fund manager.
According to BSE website, Rs 7,580 crore worth of Zee Entertianment have been pledged. This is nearly 60 per cent of the value of promoter’s stake. The 32 per cent fall in the stock price led to creation of fresh pledges on Friday, exchange data showed.
Other group companies Dish TV India, Zee Media and Zee Learn also have high promoter pledging with either MFs or non-banking financial companies (NBFCs). Shares of these companies fell between 10 per cent and 33 per cent in Friday’s trade.
“The letter by the group chairman, clearly indicates that the group is under strain. This could trigger fresh round of selling in the stock on Monday. If MFs and NBFCs start selling the pledged shares, it will further add to pressure,” said an analyst.
Typically, lenders keep a cover of 1.5-2 times while pledging shares. In other words, they disburse Rs 100 for every Rs 150-Rs200 worth of shares pledged. If the value of the pledged shares falls, lenders either liquidate their holdings or ask for more shares from the promoters.
On the equity side, besides exchange traded funds (ETFs), schemes from ICICI Prudential MF, Aditya Birla MF and Mirae MF have exposure to Zee Entertainment stock. However, in most cases the exposure is less than a per cent of the schemes total corpus.
Domestic fund houses have high exposure to the group companies both on the equity as well as debt side.
Flagship group company Zee Entertainment Enterprises, part of the benchmark Nifty index, has MF equity holding of Rs 1,850 crore, while FPI holding of over Rs 12,700 crore, an analysis of shareholding data shows. More importantly, debt MFs have exposure of nearly Rs 7,300 crore to Zee Entertainment.
The investments have landed in a tricky spot after nearly a third of the value of the stock evaporated on Friday. The woes have got exacerbated after Zee group chairman Subhash Chandra, in an open letter, expressed difficulties in repaying its lenders amid sharp sell-off in the seven listed firms belonging to the Zee group.
“I am compelled to apologize to our bankers, NBFCs and mutual funds, since I believe that I have not lived up to their expectations, despite the best of my intentions,” Chandra wrote in the letter.
Immediately after the letter, MFs sought a meeting with Zee group.
“Zee being a Nifty company, almost all MFs have exposure to the stock. We are more worried about our debt exposure. The meeting was to discuss the group’s position,” said a fund manager.
Debt funds have exposure of Rs 7,300 crore to Zee Entertainment papers. Aditya Birla MF, HDFC MF, Franklin Templeton MF and ICICI Prudential MF have the highest exposure. Sources say Aditya Birla MF has the highest exposure worth Rs 1,500 crore. Other aforementioned fund houses also have exposure of more than Rs 500 crore each.
Sources say most of this exposure is in the form of loan against share.
“While the debt exposure is indeed high, it is in the form of loan against share. In case the group is not able to repay, we have to option to invoke and sell the shares. As of now the cover is sufficient, however, if the group stock tumble further, it could lead to a problem,” said another fund manager.
According to BSE website, Rs 7,580 crore worth of Zee Entertianment have been pledged. This is nearly 60 per cent of the value of promoter’s stake. The 32 per cent fall in the stock price led to creation of fresh pledges on Friday, exchange data showed.
Other group companies Dish TV India, Zee Media and Zee Learn also have high promoter pledging with either MFs or non-banking financial companies (NBFCs). Shares of these companies fell between 10 per cent and 33 per cent in Friday’s trade.
“The letter by the group chairman, clearly indicates that the group is under strain. This could trigger fresh round of selling in the stock on Monday. If MFs and NBFCs start selling the pledged shares, it will further add to pressure,” said an analyst.
Typically, lenders keep a cover of 1.5-2 times while pledging shares. In other words, they disburse Rs 100 for every Rs 150-Rs200 worth of shares pledged. If the value of the pledged shares falls, lenders either liquidate their holdings or ask for more shares from the promoters.
On the equity side, besides exchange traded funds (ETFs), schemes from ICICI Prudential MF, Aditya Birla MF and Mirae MF have exposure to Zee Entertainment stock. However, in most cases the exposure is less than a per cent of the schemes total corpus.
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