Embattled Indian media company Zee Telefilms has appointed UBS Warburg as its financial advisor. Zee, which is keen to find new strategic investors to raise finance, has however had a few problems of late and has seen its stock dumped by investors. At one stage, Zee lost 90% of the market value it attained at its peak in the tech boom of 2000. It also shelved plans to do a $1.5 billion ADR.
The ADR was designed to fund Zee supremo Subhash ChandraÆs ambitions to launch satellites and create a roaming satellite mobile phone network across India and the Middle East, as well as expand in the Indian cable TV industry.
Unfortunately, Chandra û whose family owns Zee û delayed his ADR for too long and when the market collapsed the window of opportunity evaporated.
Since the collapse of the Indian market and the ensuing scam (see FinanceAsia cover, May, 2001), Chandra has also been fighting allegations about his involvement with Ketan Parekh, the big bull who has been at the heart of the scandal û and who was a massive buyer of Zee stock.
With the consolidation in the Indian TV sector, Zee has signaled it wants to put its house in order and abandon its grander plans. Chandra has also expressed an interest in an arrangement with Rupert MurdochÆs Star TV, even though he previously bought Murdoch out of a former partnership.
Chandra was apparently keen on appointing Warburg, in part due to long standing relationships, and also because the European firm recently hired top media investment banker, Jeff Sign from Morgan Stanley, and he respects SignÆs banking acumen.
UBS Warburg did not comment on the appointment but it looks likely that its advisory role will focus more on the M&A side, than in a fresh equity raising. Certainly the local Indian market û still staggering from scandals û is too fragile to take any new equity offerings in size, and the New York market is not exactly vibrant either.
The only viable option would be to look at doing a convertible bond. If so, Zee would be the second convertible to come out of India this year, with JM Morgan Stanley having launched a $99 million deal for Ambuja Cement.
While UBS Warburg will be pleased to have won the mandate, it must be said that ZeeÆs story will not be an easy one to tell, having lost market share in its core TV market to Star TV and Sony.
DSP Merrill Lynch was previously ZeeÆs advisor and was to launch the firmÆs ADR.
