Zee Entertainment Enterprises ltd (ZEEL) shares fell over 6 percent on Friday after global brokerage firm Morgan Stanley cut its target price for the stock by 33 percent to Rs 248 while retaining its "underweight" stance.

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In intra-day deals, the stock shed as much as 7.5 percent to Rs 232.6 per share on NSE. It ended 6.4 percent lower at Rs 235.40 as compared to 1.2 percent or 139 points fall in Nifty50 at 11,175.

Morgan Stanley analysts expect "the uncertainty to continue as the promoter debt issue lingers. We reasess our scenario values, cut our price target, and stay UW".

Promoter debt is still at Rs 6300 crore, which at the start of the year stood at Rs 13400 crore, the report said. If unpaid, lenders could invoke the pledges, resulting in further stock price weakness, it added.

ZEEL promoters on Tuesday said lenders have agreed to give a six-month extension to repay debt.

In an interview to CNBC-TV18, Punit Goenka, chief executive officer, said, "Zee is working with lenders with all options to explore and find a solution on the stake sale and the resolution stake sale that we had proposed of another 10 percent."

"The delay was purely on account of getting the Oppenheimer deal closed as that itself took us little over the anticipation. We have a lot of interest in the stock even during before the September 30th deadline. However, we realised that it may not be possible to complete the entire stake sale and hence we sought the extension."

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Further, Goenka said the total amount due to the Indian lenders is approximately Rs 5,000 crore.

Additionally, the MS report mentions that "if the sale of non-media assets is not adequate, risk of significant promoter stake dilution could create uncertainty about management control in the future and impair cash generation capability".

Yet another red flag is that ZEEL's ad growth rates may slow down due to changing competition dynamics in the industry.

"Zee is competing with larger players (including global) in the digital arena, which could dictate larger and longer investments in Zee5. Also, the share of television in India's total ad spending could start declining, while digital share could keep increasing. Zee5's inability to extract adequate share from the digital ad spending bucket could cause overall ad growth rates for Zee to slow down," the report noted.

At 11 am, ZEEL shares traded at Rs 242.20, down by 3.66 percent on BSE. The stock opened at the day's high of Rs 249.90, down from its Thursday's close of Rs 251.40 per share. So far this year, the Essel group stock has slumped 48 percent as investors dumped the stock on worries over invocation of promoter pledge by lenders.

So far, 3.32 million shares of the company changed hands on the NSE, which was a third of the three-month average daily volume of 12.4 million shares.

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First Published:Oct 4, 2019 11:00 AM IST