The Indian CAB&SAT Reporter Search

Volume no: 1. Issue no: 48

23 August 1999

ZTL: ZMWL MERGER: THE INSIDE DOPE

Zee Telefilms Ltd (ZTL) is to hold its annual general meeting on 27 September in Mumbai placing on record its results for the year ended 31 March 1999. The company's management is likely to approach its shareholders for approval to merge the company with its international operations, which come under Zee Multimedia Worldwide Ltd (ZMWL). ZTL is to issue shares to the promoters of ZMWL in the ratio of 1.33 (ZTL): 1 (ZMWL). The Foreign Investment Promotion Board has already cleared the proposal two weeks ago.

The merger will result in chairman Subhash Chandra, who is a non-resident Indian, hiking his personal stake in ZTL, a company listed on the Bombay Stock Exchange, to 59.16 per cent. Chandra along with associate promoters will hold 79 per cent of ZTL's equity. With the result, the foreign institutional investor (FII) holdings in the company will go down further. Earlier, these had reached the limit of 30 per cent mandated by law but last week the country's central bank said that the FII holding had fallen below 28 per cent. Punters expect the share price to spurt further from the high of Rs 2,698 that it touched as the week ended.

The merger is part of Chandra's grand plans to consolidate the group and subsequently its activities. ZMWL is a British Virgin Island-based company.

The swap ratio of 1.33:1 was arrived at on the basis of an enterprise valuation carried by Deloitte Haskins & Sells of ZTL and ZMWL which were valued at Rs 1500 crore and Rs 2,400 crore, respectively as on March 31, 1999.

Giving reasons for acquiring ZMWL, ZTL has stated: "We have decided to consolidate all independent operating entities functioning overseas with our base in India. We propose to achieve this consolidation by acquiring the shares of ZMWL."

ZTL has further said that the consolidation will lead to an Indian world class brand and will "go a long way in the efforts being made by the government to develop Indian brands which can compete in a globalised environment."

In ZMWL, the overseas corporate bodies (OCB) shareholders include Tortola-based Delgrada Ltd (94%), Hong Kong-based Nihon Holdings Ltd (3%) and Bahrain-based Dallah Albraka Ltd (3%). Zee Overseas consists of ZMWL BVI and its investments and interests are as follows:

As on March 31, 1998, 85 per cent of the share capital of Zee International was held by ZMWL-BVI. During 1998-99, ZMWL-Mauritius acquired 100 shareholding interest in Zee International.