The past few weeks have been turbulent for Zee Entertainment Enterprises. The company was placed under the corporate insolvency resolution process by the National Company Law Tribunal (NCLT) on February 24. However, the National Stock Exchange (NSE) removed the stock from the Insolvency and Bankruptcy Code (IBC) framework on Tuesday. The NSE’s actions came after the National Company Law Appellate Tribunal (NCLAT) stayed the NCLT order following an appeal from Zee’s Managing Director and CEO, Punit Goenka.
Zee’s share price has gone through ups and downs as these events unfolded. In this edition of chart of the week, we take a look at the company’s price action since it first started talks about the merger with Sony Pictures Networks in September 2021.
The stock had surged almost 40% back on September 14, 2021, as the company’s two biggest investors, Invesco Developing Markets Fund and OFI Global China Fund LLC, holders of 17.9% stake in the company, called for an extraordinary general meeting. The purpose of the meeting was to oust Managing Director and CEO Punit Goenka and two other directors from the board.
Almost a week later, on September 22, 2021, the stock rose again (31.7%) after its board approved the execution of a non-binding term sheet for the merger of the company with Sony Pictures Networks. Some principle terms included that the company’s shareholders will have a 47.1% holding in the merged entity, while Sony India will have 52.9%. Another term was that Sony India will have the right to appoint majority directors on the board, with Punit Goenka as the MD and CEO of the merged company.
After the news about the merger settled, investors’ focus shifted to Zee’s Q3FY22 results. The stock fell for three consecutive sessions after the company posted a 25.3% YoY drop in net profit to Rs 298.7 crore in Q3FY22 on February 2, 2022. A fall in income from advertisement, subscriptions and other sales caused the revenue to decline by 22.6% YoY.
However, the stock rose 16.7% on March 24, 2022, as its promoters showed their support for the merger and ended their demand for an EGM to remove Punit Goenka from his post.
The company showed some signs of operational recovery as its revenue grew by 19% YoY to Rs 2,361.2 crore in Q4FY22, helping the stock rise for four consecutive sessions till May 31, 2022. The rise came as its revenue beat analysts’ estimates. On October 4, 2022, the stock rose 6.3% after its board approved the composite scheme of arrangement for its merger with Sony India following the nod from the Competition Commission of India (CCI).
Recently, the merger came under scrutiny after the NCLT placed the company under corporate insolvency resolution process based on a petition filed by IndusInd Bank. Zee was a guarantor for Siti Networks for a loan worth Rs 83 crore owed to IndusInd Bank. This caused the stock to plunge 9.2% on February 24, 2023. Earlier in the month, the NCLT initiated insolvency proceedings against Zee Learn, a Zee Group company, after Yes Bank filed a petition for a loan default of Rs 469 crore by Siti Networks.
But the order was then stayed by the National Company Law Appellate Tribunal (NCLAT) on February 24 after hearing from Punit Goenka, and it has asked IndusInd Bank for a response in two weeks. On February 28, 2023, NSE followed suit by removing the stock from the Insolvency and Bankruptcy Code (IBC) framework, reverting the surveillance actions on the company, while also reincluding the stock in its futures and options contracts with expiry in May 2023. The stock rose 6.3% on the same day.
Zee Entertainment is not out of the woods yet. This volatility in Zee’s share price is expected to continue as investors track the latest news and IndusInd Bank’s response to NCLAT.
