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Zee may bring its regional GECs under Zeel
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MUMBAI: Zee is likely to bring its regional general entertainment channels under Zee Entertainment Enterprises Ltd (Zeel), moving it away from Zee News Ltd (ZNL).

The transfer will involve a share swap ratio, which will be arrived at after valuing the regional GECs. ZNL will be left with the news channels that have a FDI (foreign direct investment) cap of 26 per cent.

The idea is to capture the value of the rapidly growing regional GECs under Zeel. "The news portfolio is not growing as fast as the regional entertainment channels. The regional GECs will capture higher multiples under Zeel," says a media analyst who closely tracks Zee.

ZNL will be hard hit if the regional GECs move out unless it is compensated by other assets. Zee, however, is building a bouquet of regional news channels and has plans to launch an English news channel.

"ZNL's market cap of over Rs 10 billion is largely because of the regional GECs. But, on the other hand, the new business losses like Zee Tamil will move out of ZNL. The challenge for ZNL, however, will be to ensure high topline growth," says the analyst.

ZNL runs Hindi general news channel Zee News, Hindi business news channel Zee Business, Zee 24 Taas (Marathi), Zee 24 Gantalu (Telugu), 24 Ghante (Bengali news channel where it has a joint venture stake) and Zee News UP (franchisee model).

Zeel will, however, emerge stronger if the board decides to get the regional GECs under it. Zee Marathi and Zee Bangla are leading this revenue growth while Zee Telugu has achieved break even status.

"The market cap of Zeel is over Rs 100 billion. It is but natural to give more attention to the stronger company even if it comes at the cost of ZNL. In any case, ZNL's scrip price was not getting a proper push despite the presence of the regional GECs. ZNL's shareholders will also be given shares of Zeel based on the swap ratio if the board decides to keep the TV news business under one entity," says a senior executive at a broking firm.

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