US hedge fund urges Subhash Chandra to exit Zee Learn

A US hedge fund Moon Capital Management has asked media mogul Subhash Chandra to sell his shareholding in the Essel group’s education arm, Zee Learn to make room for a change in management, Bloomberg reported on Thursday.

Zee Learn, Zee’s education arm, owns a chain of kindergarten to 12th standard schools in India.

Moon Capital, which has been a Zee Learn shareholder since 2015 and is the largest unaffiliated holder of the company, asked Chandra to give up his holding stake in the company to pave way for a change in management.

Chandra and the group held 57 per cent of the education arm’s shares by the end of December, most of which are pledged, according BSE data.

The US hedge fund’s request to Chandra will make way for better management as per the Bloomberg report. Chandra’s exit would allow the company to engage with the potential bidders more transparently, it said.

Zee Learn shares have lost about two-thirds of their value since registering a record high in 2017.

Piling debts and management decisions

Essel group and the debt-ridden Zee have been facing trouble for quite some time now, which had led to the holding company selling a majority of its assets to pay off creditors.

The promoters owed about ₹7,000 crore to mutual funds and financial investors, including Russia’s VTB Capital as of November 2019, even after selling 11 per cent stake to existing investor Invesco Oppenheimer in July.

The promoter group was also in talks to sell stakes in Zee Learning, in which they had a majority stakeholding according to previous reports.

To help pay the debt of Essel Group, Chandra — who has been selling stake in the company’s crown jewel — had resigned as Chairman of the Board in November 2019. The announcement had come shortly after he had said that he will be selling further 16.5 per cent promoter stakes in Zee Entertainment, leaving prior holding down to just 5 per cent.

The group is also in talks to load off its infrastructure projects to repay debts. In February 2019, the company had announced its intentions to sell off infrastructure business, comprising of roads, power transmission and solar energy assets, expecting to raise over ₹20,000 crore as per previous reports.

The company’s debts and its management decisions have led to the resignation of three directors in 2019.

Invesco Oppenheimer, one of the oldest investors in the company, already holds 8 per cent in ZEEL, and has been an investor for about 17 years. The fund has now agreed to buy up to an 11 per cent stake in ZEEL from its promoters, for a total consideration of up to ₹4,224 crore, taking its stake in the company to 19 per cent.

The New York-based hedge fund has called for Shayon Chatterjee, a managing director at Moon Capital, to be appointed as an independent director at Zee Learn according to the Bloomberg report.

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