SEBI has reportedly found a discrepancy of more than $240 million in the Zee accounts, dealing another blow to the embattled media firm less than a month after its merger with Sony Group Corp’s local unit collapsed.
As part of the investigation into the Zee founders, it was found by the regulator that about $241 million may have been diverted from the Zee accounts, as per a Bloomberg report, which added that the amount is roughly ten times more than initially estimated by SEBI investigators.
SEBI’s Investigation of Zee Accounts
The report added that the amount found missing in Zee accounts is not final and may change after SEBI reviews the responses from the company executives. The regulator has been calling in senior officials at Zee, including founders Subhash Chandra, his son Punit Goenka, and some board members, to explain their stance.
A Zee spokesperson said,
“The reports and rumors pertaining to accounting issues in the company are incorrect and false. Pursuant to the SAT order, which granted relief to the current Key Managerial Personnel (KMP), the Company has been in the process of providing all the comments, information, or explanation requested by SEBI and has extended complete cooperation on all aspects,”
SEBI’s latest findings add to Punit Goenka’s woes as the Zee CEO tries reassuring investors after its $10 billion merger with Sony fell apart. The transaction, two years in the making, was terminated in January after a months-long stalemate on who would lead the new entity.
Zee Denies Re-engagement with Sony After Merger Fallout
Zee has rebuffed reports suggesting it is reconsidering engagement with Sony to explore the possibility of reviving the merger. The regulatory scrutiny into alleged financial improprieties involving the father-and-son duo has sparked significant contention between Sony and Zee since mid-2023. Sony became apprehensive about allowing Goenka to lead the merged entity, while Goenka remained adamant, citing the promised CEO position in the 2021 merger agreement. This deadlock ultimately prompted Sony to abandon the deal in January.
The standoff underscores the complexity and tension surrounding the failed merger, with both companies grappling to resolve differences amid regulatory scrutiny and corporate governance concerns.
Zee Shares Plummet 33% to 52-Week Low Following Merger Fallout
On January 23, Zee shares experienced a drastic 33% decline, plummeting to a 52-week low of Rs 152.5, marking its most significant single-day drop in history. Subsequently, a trend of bottom fishing emerged in the market, fueled by expectations that Zee would attract other potential suitors for prospective deals.
The proposed merger between Zee and Sony initially prompted a re-rating of Zee’s valuation, as investors anticipated enhanced corporate governance standards and substantial merger synergies. However, following the termination of the Sony deal, Zee’s stock has undergone multiple de-ratings and sell calls.
CLSA downgraded Zee from BUY to SELL and revised its target price to Rs 198. Similarly, Nuvama reduced its FY25E/26E EPS on Zee by 16%/24% and downgraded the stock to a reduced rating, setting a target price of Rs 190. These actions reflect the market’s reaction to the uncertainty surrounding Zee’s prospects amidst the failed merger and regulatory investigations.
Analysts Downgrade Zee Amidst Concerns Over Financial Performance and Governance
Elara has downgraded Zee to sell, setting a target price of Rs 170, while Motilal Oswal also downgraded the stock to neutral with a target price of Rs 200.
In the December quarter, Zee reported a remarkable 141% year-on-year growth in its consolidated net profit, amounting to Rs 58.5 crore. However, its revenue experienced a 3% year-on-year decline, reaching Rs 2,045 crore. Despite this, the company foresees a gradual recovery in margins beginning in the second half of FY25, aiming for an EBITDA margin of 18-20% for FY26, coupled with an 8-10% revenue compound annual growth rate moving forward.
While actively pursuing measures to revive its business and ensure efficient operations as a stand-alone entity, Zee continues to face apprehensions from analysts regarding its weak financial position, corporate governance issues, and potential litigation outcomes. These concerns persist despite the company’s efforts to address them.
Also Read: Renault India Teams Up with BLS E-Services to Boost Rural Sales
Tata Group’s Market Cap Hits Rs 30 Lakh Crore, Surpassing Pakistan Economy
Tata Advanced Systems and Air India to Invest Rs 2,300 Crore in Karnataka
