In a recent report, Zee Entertainment Enterprises Ltd. was found to have a major accounting irregularity, with over $240 million missing from the company's books, according to the Securities and Exchange Board of India (SEBI). This information adds to the difficulties facing the troubled media company, which was already facing difficulties following the collapse of Zee's merger with the local division of Sony Group Corp.
Specifics
SEBI discovered that there may have been misappropriation of about 20 billion rupees ($241 million) from Zed during its investigation into the company's founders. This sum is roughly ten times greater than what the SEBI investigators had originally calculated. The news precipitated the largest drop in Zee shares in a month, with shares falling as much as 15% in Mumbai trading.
The reported financial gap is not finalised, and SEBI is awaiting responses from Zee executives, including founders Subhash Chandra and his son Punit Goenka, to explain their stance. The regulator is closely scrutinising the matter, and the executives are expected to provide clarifications in response to the ongoing probe.
While Zee is currently re-evaluating its merger possibilities with Sony, significant differences persist, hindering any potential revival. Zee CEO Punit Goenka's challenges have intensified following the termination of the $10 billion merger plan with Sony in January, after a prolonged stalemate over leadership positions in the new entity.
Despite Zee's attempt to reassure investors and engage in discussions with Sony, the regulatory probe into alleged financial improprieties by the father-and-son duo has created hurdles. Sony's concerns about Goenka's role in the merged entity, coupled with Goenka's refusal to yield his promised CEO position, led to the deal's ultimate collapse.
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The August order by SEBI barred Zee founders from holding executive or director positions in any listed firm, citing the abuse of their position and fund diversion for personal benefit. Zee appealed the order, securing a partial reprieve in October, allowing Goenka to hold an executive position during the ongoing probe.
The failed merger dealt a blow to both companies, as it would have strengthened Sony's content portfolio with Zee's regional Indian language content while improving Zee's financial health. Zee reported a drastic 95% drop in full-year profit, and despite a profit of 585.4 million rupees for the quarter ended Dec. 31, it fell short of analyst estimates. The future remains uncertain for Zee as it navigates the aftermath of the financial scandal and seeks potential partnerships to revive its fortunes.
You may also read: The Zee-Sony Merger: A Corporate Drama Extravaganza
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