India's biggest listed media company, Zee Telefilms Ltd announced on Wednesday, announced a major restructuring of its business, which will see it hive off news and regional language channels and the cable distribution arm as separate companies and list them on the stock exchanges.
The restructuring which is approved by it’s board includes hiving off its cable distribution arm Siti Cable and DTH business Dish TV.
The restructuring is a response to investors' concerns that Zee had too many businesses under one company, making it hard to evaluate their prospects, and Zee hopes to attract more investment in the different units to fund their growth. Zee chief Subhash Chandra announced approved listing of some subsidiaries after the board gave clearance to the proposal. Zee said it would spin off the news and regional language channels into Zee News Ltd., and its cable business into Wire and Wireless India Ltd., leaving Zee Telefilms as a focused producer of TV programming, movies and music. The board also gave a go-ahead to demerger of consumer businesses, which when approved will create a fourth listed company. "The proposal to demerge the consumer services business for Dish TV which has about a million subscribers has got in-principle approval from the Board. The management has been authorised to evaluate the proposal and its consequences and present to the Board," Zee said.†When approved, this would create a fourth listed company," Zee said in a statement.
Zee shareholders would get shares in the new firms proportionate to their holdings in Zee Telefilms, the company said in a statement.
Zee news channels have been hit by competition from rivals such as New Delhi Television Ltd. and recent entrant CNN IBN, a joint venture between Television Eighteen Ltd. and Timer Warner Inc. Zee's Hindi channels have also been under competitive pressure from channels owned by News Corp.'s Star and Sony Zee operates channels in regional languages such as Bengali, Punjabi, Marathi and Telugu, apart from its Hindi entertainment channels.
Zee Chief Subhash Chandra said: "We feel confident that these measures of restructuring these businesses will result in streamlining operations and better exploitation of opportunities in each area to build long-term shareholder value. It would also clear the ground for acquisitions and strategic or financial partners in the demerged businesses, apart from unlocking shareholder value."
Sensing an imminent restructuring, the Zee Telefilms stock has been rising for quite some time. It scaled its 52-week high at Rs 257 on Thursday. Today, however, it went down marginally. The stock closed at Rs 236.50 on the Bombay Stock Exchange, 0.25 per cent lower than yesterday's close of Rs 237.05.