Media stocks in focus post Zee-Sony deal; shares advance up to 25%

Shares of media including broadcasting & cable TV operators rallied on the bourses by up to 25 per cent after the Board of Directors of ZEE Entertainment Enterprises Limited (ZEEL) unanimously provided an in-principle approval for the merger between Sony Pictures Networks India (SPNI) & ZEEL.

ZEEL zoomed 25 per cent to hit a 52-week high of Rs 319.50 on the BSE in intra-day trade. Zee Learn surged nearly 20 per cent to Rs 16.64, while TV18 Broadcast gained 11 per cent to Rs 40.40, followed by Dish TV India (up 10 per cent to Rs 21.54), New Delhi Television or NDTV (up 10 per cent at Rs 96.35), Network18 Media & Investments (up 9 per cent at Rs 55.80), Hathway Cable & Datacom (8 per cent at Rs 25.70) and Sun TV Network (7 per cent at Rs 519.30) in intra-day trade today.

At 11:08 am; the Nifty Media index, the top gainer among sectoral indices, was up 9 per cent, as compared to 0.15 per cent rise in the Nifty 50 index.

In a statement, Zee said its board has evaluated the merger not only on financial parameters, but also on the strategic value which Sony brings to the table. The board concluded that the merger will be in the best interest of all the shareholders & stakeholders. The merger is in line with ZEEL's strategy of achieving higher growth and profitability as a leading media & entertainment company across South Asia. The board has authorised the management of ZEEL to initiate the required due diligence process.

Basis the existing estimated equity values of ZEEL and SPNI, the indicative merger ratio would have been 61.25% in favour of ZEEL. However, with the proposed infusion of growth capital into SPNI, the resultant merger ratio is expected to result in 47.07% of the merged entity being held by ZEEL shareholders and the remaining 52.93% of the merged entity being held by SPNI shareholders. CLICK HERE FOR FULL REPORT

However, the deal, analysts say, should put to rest investor's concerns regarding corporate governance issues, and can result in significant re-rating for the stock going ahead. It currently trades at around 16/14x FY23/24 earnings. CLICK HERE FOR FULL REPORT

Meanwhile, shares of NDTV were locked in the 10 per cent upper circuit band for the third straight day, at Rs 96.35 today, amid rumours of buyout by Adani Group. The stock is trading at its 52-week high level and rallied 33 per cent in past three trading days.

On its part, NDTV has denied any such development and has said the Founder-Promoters, Radhika and Prannoy Roy, are not in discussions now, nor have been, with any entity for a change in ownership or a divestment of their stake in NDTV. “They individually and through their company, RRPR Holding Private Limited, continue to hold 61.45 per cent of the total paid-up share capital of NDTV,” the company said in its exchange filing. READ HERE