Zee Telefilms to feel the pinch

Zee Telefilms Ltd. and its promoters may be tied down for funds with the

Prasar Bharati encashing the Rs 68-crore bank guarantee of Zee’s erstwhile

subsidiary Buddha Films Pvt. Ltd.

Buddha Films, which bagged the domestic airtime marketing rights for cricket

matches to be telecast on Doordarshan between 2000 and 2004 for Rs 450 crore,

still owes Prasar Bharati a sum of Rs 260 crore.

Buddha Films had paid Rs 22.5 crore as advance and agreed to pay the balance

in equated annual installments. While it paid the annual fee for 2000, it was

unable to pay the amount due in September 2001 as it failed to generate the

estimated advertising revenues.

To date, Buddha Films has paid Rs 122 crore to Prasar Bharati.

An analyst with a leading domestic brokerage said, "Zee could be

affected to the extent that the amounts receivable by it from the promoters and

from Buddha Films could be delayed. Zee has reportedly loaned around Rs 100

crore to Buddha Films at market rates. It has also loaned around Rs 90 crore to

the promoters, who have yet to pay back Rs 90 crore of the Rs 220 crore

liability incurred by Zee when it picked up equity in Amitabh Bachchan

Corporation Ltd. and B4U in April this year."

"Zee will not be hit directly, as Buddha Films is no more its subsidiary

(Zee has transferred its stake in Buddha Films to the promoters of Zee). It is

highly unlikely that Zee will bail out the promoters or Buddha Films by way of

additional funding. Also, with Zee trying to forge international alliances, it

would be in its interests to steer clear of any controversy," another

analyst with a domestic brokerage said.

"But the finances of the promoters may come under pressure, as the bank

guarantee would have been secured against fixed deposits and counter-guarantees

of the promoters. There could be some indirect effect on Zee’s finances as

well, since the promoters have to pay back Zee about Rs 90 crore," he

added.

As per market sources, the promoters are expected to sell their stake in Zee

and pay off their outstandings to the company. (The grapevine has it that

AOL-Time Warner may pick up minority stake in Zee.)

IRIS