Zee Entertainment tanks 14% as NCLT admits company to insolvency resolution

The NCLT decision to begin bankruptcy proceedings has overshadowed Zee Entertainment's merger with Culver Max Entertainment (Sony)

Shares of Zee Entertainment Enterprises (ZEEL) tanked 14 per cent to hit a new 52-week low of Rs 176.60 per share on the BSE in Thursday’s early trade after the National Company Law Tribunal (NCLT) accepted IndusInd Bank’s insolvency petition against the company and admitted it into the corporate insolvency resolution process. 

The share of the media company had hit its previous 52-week low on June 20, 2022 at Rs 200.50. With today’s fall, the stock is now down 43 per cent from its 52-week high of Rs 308.65 that was touched on Apri 4, 2022. 

At 10:12 am, the stock had recouped some losses and was down 9 per cent. 

The bankruptcy court’s order came in response to a petition that was filed by IndusInd Bank under Section 7 of the Insolvency & Bankruptcy Code, 2016. (IBC)

As per a report by the Economic Times, the move has likely overshadowed ZEEL’s merger with Culver Max Entertainment (Sony) as after the initiation of insolvency proceedings, schemes like mergers and amalgamations will not be possible until ZEEL’s promoters settle the dues with the lender, the report said quoting an expert.

"After admission of insolvency proceedings by NCLT, the stock price has corrected sharply. The next NCLT hearing is due on March 09, 2023, and unless ZEEL settles the dispute amicably or achieves a stay on the order, merger time-line can get delayed further. We retain BUY on the stock with a target price of Rs277 (21x Sep-24 EPS). However, given there are concerns over delay in merger time-line (primary premise of our BUY call) the stock remain under pressure in the near-term," wrote analysts at Prabhudas Lilladher in a note.

In December 2021, Sony and ZEEL decided to merge their television channels, film assets and streaming platforms, following which IndusInd Bank had approached the NCLT against ZEEL seeking a payment of a default of over Rs 89 crore.  

Moreover, some of ZEEL lenders, including IndusInd, Axis Bank and IDBI Bank are in opposition to its merger with Sony and have also filed a petition with the NCLT in this matter. As per reports, the banks believe ZEEL should first clear its dues before the merger is completed. 

Besides, ZEEL had also reportedly stood as a guarantor of a loan worth Rs 150 crore given by IndusInd Bank to Siti Networks, another Essel group company. NCLT has also admitted a separate plea to initiate insolvency proceedings against Siti.

Following the development, Punit Goenka, MD and CEO of ZEEL said the company remains committed towards its merger with and into Sony and it will continue to take required measures to achieve timely completion of the same. 

Technical View

Bias: Negative

Target: Rs 160

Resistance: Rs 198

Shares of Zee Entertainment have been trading with a negative bias for the last three months, and have declined over 33 per cent during the same period. 

With today's massive fall, the stock is seen trading below the lower-end of the Bollinger Band both on the daily and weekly chart. Thus, the bias is likely to remain fairly bearish as long as the stock sustains below Rs 198.

The monthly chart indicates that the stock may seek support around the trendline at Rs 160-odd level. 

If support at Rs 160 holds, than the stock may attempt a pullback towards 230-odd level in the following trading sessions.

(With inputs from Rex Cano)