Mutual Funds

Which mutual funds have exposure to Essel Group’s companies?

A news report stating that Essel Group’s name may figure in a probe linked to demonetisation-led deposits of Rs 3,000 crore, led to a free fall of the shares of its group of companies on January 25.

A media report from The Wire stated that The Serious Fraud Investigation Office (SFIO) is currently probing a company called Nityank Infrapower (formerly Dreamline Manpower), for deposits of over Rs 3,000 crore made just after demonetisation — the currency culling exercise carried out by the Modi government from November to December 2016.

An examination of publicly-available documents showed that Nityank Infrapower and a group of shell firms carried out financial transactions that involved a few firms associated with Subhash Chandra’s Essel Group between 2015 and 2017, the report said.

The company, however, told investors in a conference call “it has nothing to do with the news reported by the Wire” and that it has initiated legal action against The Wire Media Group.

As many as 10 mutual fund houses have investments in Zee Entertainment Enterprises and Dish TV, while four mutual funds have exposure to Essel Propack.

MFs Zee Entertainment

In Zee Entertainment Enterprises, ICICI Prudential Mutual Fund held 1.9 percent of the company’s equity capital as of December 2018, while that of Aditya Birla Sun Life Mutual Fund held 0.56 percent of Dish TV’s equity capital.

Tata Mutual Fund had invested 0.17 percent in Zee Learn as on July to September 2017.

Shares of all Essel Group companies were hit after the release of the media report. Zee Entertainment Enterprises shares plunged 33 percent intraday to hit the 44-month low of Rs 288.95.

Just a few days ago, the company reported exceptionally good results for the December 2018 quarter, beating estimates with a profit growth of 50.5 percent from a year ago, while EBITDA (earnings before interest, tax depreciation and amortisation) margins were at 34.8 percent.

Other Essel Group stocks also took a hit. Caught under selling pressure, Essel Propack went down by 16 percent, Zee Media Corporation fell by 9 percent, and Dish TV by 33 percent.

The five listed companies of the group saw their combined market capitalisation erode by nearly Rs 14,000 crore on January 25.

MFs exposure to Dish TVMF Essel Propack

The promoter Group held a 41.6 percent stake in Zee as of December 2018, of which 59.37 percent was pledged. Most of the shares were pledged at a price of over Rs 500, so it is possible the party holding the pledged shares sold some shares.

Fund managers did comment on stock specific news, but most of the said they will wait and watch the stock before taking any decision.

Hours after a fall in shares of Essel Group on January 25, the company’s Chairman Subhash Chandra in an open letter apologised to his “bankers, NBFCs and mutual funds” for not living up to their expectations “despite the best of my intentions”. He said the IL&FS debacle had diminished the promoters’ ability to service their borrowings.

Chandra blamed certain “negative forces” for attacking the share price and “sabotaging Zee Entertainment’s strategic sale process.” He stressed that all their operating companies were performing well and the strategic sale process was still on.

Commenting on the same, Essel Propack informed the exchanges that the company and its promoter have no direct or indirect relation to entities appearing in the news item. “Reduction in the share price of Essel Propack on Friday (January 25) could be possibly wrongly reading of the news item or misinterpreting and any linkage has absolutely no bearing on Essel Propack with the news item. There is no price sensitive information or impending information which adversely bearing on price of securities or business of the company.”

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