The Zee Telefilms board cleared a capital restructuring programme. Under the plan, the company will write down its investment in its overseas subsidiaries by Rs 1771.6 crore. This is being done to reflect the “intrinsic value of business”, a Zee Telefilms release said.
It is also restructuring the capital of Siticable, which has an accumulated loss of Rs 149.1 crore including dimunition in value of certain moveable assets (to the tune of Rs 89.5 crore).
The company is writing off Rs 149.1 crore by reducing the share capital of Siticable. Following this, Siticable’s equity base will be reduced to Rs 90 lakh. Zee Telefilm’s investment in Siticable will come down from Rs 317.9 crore to Rs 168.9 crore.
“Both measures are aimed to reflect the true book value of assets in our financial statements. Such restructuring will better reflect the return on capital employed,” said the release.
As part of its restructuring in 1999-2000, Zee had acquired a number of overseas companies. Its total investments were of Rs 3435.6 crore and reserves and surplus account including share premium was Rs 3,865.4 crore.
These companies, which were Zee subsidiaries, were broadcasting several of the group’s channels from their overseas locations on account of regulatory restrictions on uplinking.
“After removing these restrictions, Zee network decided to uplink several of these channels from India for strategic reasons. By moving uplinking of these channels to India, the intrinsic worth of these overseas subsidiaries shifted to the company,” the release said.
Deloitte Haskins and Sells was appointed to value the business of overseas subsidiaries and, accordingly, the company is undertaking the financial restructuring.
“The receipt of value by the company upon taking over the channels will be an intangible. However, in order to avoid the creation of intangibles in the company’s financial statements, it is proposed to write down the investment as proposed out of its reserves and surplus account,” the release said.