Shares of ZEE Entertainment plunged 14 per cent in Thursday's trade as NCLT admitted the media firm to corporate in insolvency resolution process.
In a BSE filing, the company said NCLT's Mumbai Bench has pronounced its order on the petition filed by IndusInd Bank against ZEE under Section 7 of the Insolvency & Bankruptcy Code, admitting the company to corporate insolvency resolution process under the provisions of the Code.
Following the development, the scrip plunged 14.26 per cent to hit a low of Rs 176.60 on BSE.
Foreign brokerage UBS said the issue pertains to borrowings by Siti Networks for which ZEE was a guarantor. It said the overall amount involved is Rs 83 crore, which it said is not material considering ZEE's cash balance and Cash flows. That said, the news could further delay the Sony merger process, as the final hearing on the merger was scheduled for March 9, which is a negative, UBS said while suggesting a 12-month target of Rs 350 on the stock.
"ZEE's options include an appeal with the NCLT to set aside this order or in the interest of completing the merger, settle the dues under dispute. These amounts have largely already been provided in ZEE's books, and we believe any potential settlementi s not likely to result in material P&L impact," UBS said.
Earlier this month, NCLT directed to initiate insolvency proceedings against group firm Zee Learn, following a petition filed by private sector lender Yes Bank. Yes Bank had claimed a default of Rs 468.99 crore by the Essel Group company. Out of the default amount of Rs 468.99 crore, the principal amount was Rs 410.67 crore and Rs 58.32 was interest.
Zee Entertainment Enterprise recently announce a 91.86 per cent decline in its consolidated net profit at Rs 24.32 crore for the December quarter, on account of higher content cost and investment in its OTT platform.
The company had reported a net profit of Rs 298.98 crore in the October-December quarter a year ago, Zee Entertainment Enterprise Ltd (ZEEL) said in a regulatory filing. Its total income was marginally down at Rs 2,127.23 crore during the quarter under review as against Rs 2,130.44 crore in the corresponding quarter.
According to the company, "challenging macro economic environment continues to impact operating performance." Its programming and technology cost increased Year-on-Year (YoY) due to higher content cost in movies and linear and continued investment in its OTT platform Zee5, the company said in its earnings update for Q3FY23. Its revenue from advertisement was down 15.62 per cent at Rs 1,063.82 crore in the October-December quarter. It was Rs 1,260.80 crore in the corresponding quarter a year ago.
On December 22 last year, ZEE Entertainment announced its merger with Sony Pictures Networks India after signing definitive agreements. As per the deal, Sony would invest $1.575 billion and hold 52.93 per cent stake in the merged entity and Zee will have the remaining 47.07 per cent.
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