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Zee Entertainment share closes 5.81% lower after Morgan Stanley cuts target price on debt concerns

Zee Entertainment Enterprises share price fell in trade today after brokerage Morgan Stanley cut target price sharply citing debt concerns.  ZEE Entertainment share price fell up to 7.32% to Rs 233 compared to the previous close of Rs 251.40 on BSE.  It ended 5.81% or 14 points lower at Rs 236.80 on BSE. The large cap share closed below its its 5-day, 20-day, 50-day, 100-day and 200-day moving averages.

The stock has lost 45% during last one year and fallen 50% since the beginning of this year. The share has declined 24% during last five years.

The stock has been hit by corporate governance issues during the last one year.  The brokerage said sale of pledged shares and fear of more to come, along with uncertainty on future of business have hit the stock in last 12 months.

Uncertainty is expected to continue as promoter debt issue continues, the brokerage said, adding it remains underweight on stock and cut its target price to Rs 248 from Rs 370. Currently, promoters’ debt stands at Rs 6,300 crore.

“If the above mentioned debt is unpaid, then lenders could invoke pledged shares, resulting in further weakness, though lower corporate tax rates lifted our net profit estimates,” Morgan Stanley said.

In August, Zee Entertainment sold its 11 per cent stake to Invesco Oppenheimer Developing Markets Fund for Rs 4,224 crore to pare debt. The fund already had an 8 per cent stake in Zee that took its total holding up to 19 per cent.

The stake sale has come through at a premium of 10 per cent, which is 15-20 per cent lower than what the market had speculated.

However, Zee Entertainment reported a healthy 62.56 per cent increase in consolidated net profit at Rs 529.76 crore for the first quarter that ended in June 2019, helped by growth in subscription revenue.

The company had posted a net profit of Rs 325.88 crore in April-June quarter a year ago. Total income during the quarter under review stood at Rs 2,112.03 crore, up 15.93 per cent from Rs 1,821.78 crore in the corresponding quarter of the previous year.

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