Sony says it's taking Sebi allegations against Zee promoters 'seriously'

Sony has taken the allegations against Zee Entertainment Enterprises (Zee) promoters seriously and is monitoring the situation, a statement by Sony Pictures Entertainment (SPE) from Culver City (California) said.

“There have been several erroneous press reports recently speculating about the future of Zee’s planned merger with Sony Pictures Networks India (SPNI) following Sebi’s (Securities and Exchange Board of India’s) interim order against Subhash Chandra and Punit Goenka. We take the Sebi interim order very seriously and will continue to monitor developments that may affect the deal,” Sony said.

Sony was reacting to the Sebi order asking Zee chief executive officer (CEO) Punit Goenka and founder Subhash Chandra to step down from any director’s position. The order alleged that the duo siphoned off funds from Zee.

Goenka and Chandra have denied the charges and moved the Securities and Appellate Tribunal (SAT), asking it to stay the order where the matter is pending. On further investigation into the bank statements and tracing of the source of the money, Sebi informed SAT that  it founded glaring irregularities.

Merger at risk after Sebi order: BofA Securities

The merger is at risk following directions passed by capital markets regulator Securities and Exchange Board of India (Sebi), BofA Securities has said in a note.

“The bull-case on Zee in our view was that after merger with Sony, the corporate governance and business momentum would improve, with the Sony management getting involved. But after Sebi’s interim order against Zee promoters, this puts risks to the merger with Sony,” the brokerage has said.

The US-based brokerage doesn’t have any price target, given the uncertainty surrounding the merger and pressure on revenue growth due to slower ad spending.

“We have a ‘no’ rating on Zee as we await visibility on the merger going through or not. In a scenario Zee promoters get a stay on Sebi order and the merger goes through, the stock may rerate on expectations of improving governance and synergies from the merged entity. In a scenario where the Sebi order stays, risks remain either of Zee-Sony merger not going through. If the merger goes through, Punit Goenka may not be allowed to be chief executive officer of the merged entity. We would then remain unsure of the outlook of the merged entity. We estimate the stock would likely derate to 10-12x price-to-earnings multiple. We adjust our 2023-24 through 2025-26 estimated earnings per share by 0-7 per cent based on our recent checks,” the BofA note added.