Blackstone is buying a stake in Essel Propack. Will that solve the cash flow problems for the Essel Group, which has delayed the FMP redemption by mutual funds?

Blackstone has agreed to buy 51% stake in Essel Propack at a price of Rs.134 per share. Essel Propack is the largest packaging company in India and it is part of the Essel group owned by Subhash Chandra, promoter of Zee TV. The promoters of the Essel Group have been trying hard to sell shares of their group companies so as to use the proceeds of the sale to repay loans taken from banks and mutual funds. In fact, Subhash Chandra has agreed to repay all the loans by September this year, which is why this stake sale is required.

However, the total value of the transaction will only come to Rs.3000 crore and only part of the promoter stake will be purchased by Blackstone. Subsequent to the offer, Ashok Goel and Trust that own 57% in the company will end up becoming a minority shareholder. However, Essel group has debt to the tune of Rs.12,000 crore and may require few more such deals to make the good the losses to the banks and mutual funds.