Motilal Oswal Securities, which attended a conference call hosted by ZEE Entertainment Enterprises Ltd (ZEE) on March 4, said the media company has established an independent committee to investigate the allegations made against the company, its promoter and key management personnel (KMP). Based on the committee’s findings, the board will take the appropriate actions.
The management, Motilal Oswal said, has reiterated that there was no misappropriation of money and expects improvement in performance in 2HFY25. "The management has reiterated that there was no misappropriation of funds within the company, and that there were no such findings by the SEBI as well," it said.
Prabhudas Lilladher said recalibration measures taken to reset the cost structure by re-visiting content, technology, marketing and people spends will take some time to unfold and the competitive landscape is likely to evolve after merger of Disney-Viacom18.
"We maintain our estimates and expect sales CAGR of 10 per cent over next 2 years with Ebitda margin of 11.3 per cent/16.8 per cent in FY24E/FY25E but upgrade our rating to HOLD (earlier REDUCE) with a target price of Rs 167 (12x FY26E EPS; no change in target multiple) amid ~18% correction in stock price since our last note," it said.
Motilal Oswal said the board has set up an independent investigation committee, led by Satish Chandra, former judge of Allahabad Court, to look into the allegation made against the company or promoter or KMP. Based on the committee’s findings, the board will take appropriate action.
"ZEE’s application to NCLT states the grounds for incorrect termination, and emphasizes that it is not the company’s failure. There is no likelihood of any other strategic or financial partnerships in the near term," Motilal Oswal suggested ZEE as saying.
ZEE said the business has been impacted by Covid; industry headwinds led to advertisement slowdown, and that prolonged merger impacted regular operation and business. The ZEE management felt that weak performance was not a structural issue and the management expects visible improvements in performance in H2FY25. ZEE is sitting on a net cash of over Rs 800 crore.
"ZEE is into entertainment and not into sports; hence, it will focus on increasing the advertisement pie, mostly contributed by FMCG firms. The company will consider various factors, such as past performance and market share gain, to look for a change in management, if necessary," Motilal Oswal said.