BofA Securities, a financial services company, has stated that Zee Entertainment Enterprises Ltd’s (Zee) fundamentals are deteriorating due to weak business, merger risks, and an investigation by the Securities and Exchange Board of India (SEBI). In a report titled ‘Increasing investigation overhang and rising risks of Sony merger?’, the brokerage did not give any rating on the media group and stated that they are awaiting visibility on the merger going through or not.
BofA Securities mentioned that competition in sports is also rising, with Disney now offering free streaming after JioCinema. The investigation by market regulator SEBI is increasing the corporate governance overhang on Zee. In the latest development, SEBI recently said that Zee promoters diverted money from the listed entity and banned Subhash Chandra and his son Punit Goenka from holding board /top executive positions in listed companies, potentially preventing Goenka from being the CEO of the merged Zee-Sony entity.
The report stated that SEBI’s interim order against Zee promoters puts risks to the merger with Sony. It remains unclear in what direction the merger will go and whether Zee promoters will be finally barred or not. However, the risks of the merger with Sony going through have increased, and it also remains unclear if Goenka would be able to be the CEO of the joint entity.
The Competition Commission of India (CCI) approved the amalgamation of Zee Entertainment Enterprises Limited (ZEE) and Sony in October 2022. However, given the current situation, the future of this merger remains uncertain.
