India’s Securities and Exchange Board (SEBI) uncovered a significant financial discrepancy in the accounts of Zee Entertainment Enterprises, amounting to over $240 million or approximately ₹2,000 crore. This revelation adds to the challenges faced by the media company, which recently experienced the collapse of its merger with Sony Group Corp’s India unit.
SEBI’s investigation into Zee’s founders revealed that around ₹2,000 crore ($241 million) might have been redirected from the company. This amount is substantially higher than the initial estimates made by SEBI investigators.
Ongoing Investigations and Company Responses
SEBI has summoned senior officials, including founders Subhash Chandra and his son Punit Goenka, along with certain board members, to explain the discrepancies. However, SEBI’s spokesperson did not respond to inquiries from Bloomberg and Reuters.
While a Zee spokesperson declined to comment on the fund diversion, they mentioned that the company is actively cooperating with SEBI’s probe.
Impact on Zee CEO and Merger Attempt
These findings pose challenges for Zee CEO Punit Goenka as he attempts to reassure investors following the failed merger with Sony. The termination of the $10 billion merger plan in January, amid disagreements over leadership, has put additional pressure on Zee’s financial standing.
The collapsed merger would have provided Sony access to Zee’s extensive content library in regional Indian languages, potentially boosting Zee’s financial health. However, Zee reported a significant decline in profit for the past year and missed analyst estimates for the quarter ending December 31.
Reviving the Merger and Regulatory Issues
Reports suggest that Zee is considering re-engaging with Sony to explore the possibility of reviving the merger. However, significant differences between the two companies persist, particularly regarding leadership roles.
The regulatory investigation into alleged financial improprieties involving Zee’s founders has been ongoing since mid-2023. Conflict between Sony and Zee arose over leadership positions, ultimately leading to the termination of the merger in January.
SEBI had previously prohibited Zee founders Chandra and Goenka from holding executive or director positions in any listed firm due to alleged fund siphoning. Zee appealed this order, securing a partial reprieve allowing Goenka to hold an executive position during the ongoing probe.
In summary, the financial discrepancy uncovered by SEBI adds further complexity to Zee Entertainment’s already turbulent situation. As investigations continue and the company explores potential merger revivals, the regulatory and financial challenges facing Zee and its leadership remain a focal point for investors and industry observers.
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