India: Essel may sell part of financial services business to reduce debt

Subhash Chandra Chairman, Essel Group & ZEE

Subhash Chandra’s Essel Group, under pressure from lenders to pare debt, is looking to sell parts of its financial services business, two people aware of the development said.

“They are looking at the lending business and the mutual fund business,” said one of the two people cited above, requesting anonymity. “They have started reaching out to prospective buyers.”

The discussions are at an early stage and the exact contours of the stake that the group is willing to sell in these businesses will be determined based on how the talks progress, added the person.

The move to sell some of its finance businesses is part of Essel Group’s broader efforts to deleverage itself. The group has already initiated talks to sell stakes in broadcaster Zee Entertainment Enterprises Ltd and road and solar power assets. The group’s current state, by chairman Chandra’s own admission, is because of misplaced bets in infrastructure projects and the purchase of a rival satellite TV business.

A spokesperson for Essel Group declined to comment on Mint’s queries regarding plans to monetize its financial services businesses, stating that the group does not respond to speculation.

The group’s financial services arm operates businesses including foreign exchange, lending to small and medium businesses, home finance, mutual funds, wealth management, private equity and investment banking.

In 2016, Essel Finance acquired Peerless Mutual Fund, which then had assets under management worth close to 1,000 crore.

In November, the group announced a 50% stake sale in Zee Entertainment Enterprises. It said then the move would help maximize long-term value and transform it into a global media-tech player. It hired Goldman Sachs (India) Securities Pvt. Ltd as an investment banker and Lion Tree as an international strategic adviser to manage the stake sale.

The group is also in talks with private equity investor Actis LLP to sell Essel Infraprojects Ltd’s solar power projects for 5,500-6,000 crore, Mint reported in November.

Last month Mint reported the group had placed six road projects on the block and was seeking a combined enterprise value of 11,500 crore.

While the group has been engaged in talks over the last several months to sell various assets, the divestments have assumed more urgency after the group’s flagship media business saw a 26% drop in its stock price on 25 January.

Following the stock plunge, Chandra, in a statement to shareholders, said his group was facing headwinds due to bets gone wrong in infrastructure, the acquisition of DTH business of Videocon group and the liquidity crisis that plagued non-banks after defaults by IL&FS.

On Monday, the group said it had sealed a formal agreement with its lenders, which gives it till end-September to deleverage its balance sheet. The group entered into the agreement with lenders who hold pledged shares of its listed entities Zee Entertainment Enterprises and Dish TV India.

“As per the consent, the lenders have agreed that there will not be any event of default declared till 30 September 2019, due to the movement in the stock price of Essel Group’s mentioned listed corporate entities,” the company said.

This article was first published on livemint.com