In a recent turn of events, the Securities and Exchange Board of India (Sebi) has uncovered a staggering accounting issue of more than Rs 1,997 crore in the accounts of Zee Entertainment Enterprises Ltd. This revelation comes as another setback for the beleaguered media firm, occurring less than a month after its high-profile merger with Sony Group Corp’s local unit collapsed.
Sources familiar with the matter, who chose to remain anonymous as the information is not public yet, disclosed that Sebi’s investigation into the Zee founders revealed a potential diversion of around Rs 1,997 crore from the company. This amount is approximately ten times more than initially estimated by Sebi investigators.
It is important to note that the uncovered amount is not final, and Sebi intends to review responses from Zee executives, including founders Subhash Chandra, his son Punit Goenka, and some board members. The regulatory body has been summoning senior officials at Zee to provide explanations, adding another layer of scrutiny to the ongoing investigation.
A spokesperson for Zee declined to comment on the fund diversion but mentioned in an email that the company is actively cooperating with the regulator by providing all the necessary comments, information, or explanations requested during the probe.
This development compounds the challenges faced by Punit Goenka, Zee’s CEO, as he attempts to reassure investors following the collapse of the $10 billion merger plan with Sony. The termination of the two-year-long merger plan in January stemmed from a prolonged stalemate over leadership roles in the new entity.
Despite the setback, Zee is reportedly re-engaging with Sony to explore the possibility of reviving the merger. However, significant differences persist, casting uncertainty over the success of any potential revival.
The regulatory probe into the alleged financial improprieties of the father-and-son duo, Subhash Chandra and Punit Goenka, has been a source of contention between Sony and Zee since mid-2023. The standoff led to Sony’s apprehension about allowing Goenka to lead the merged entity, while Goenka insisted on his right to the CEO position, as per the 2021 merger pact. Ultimately, this disagreement resulted in Sony scrapping the deal in January.
In August, Sebi issued an order barring Zee founders Chandra and Goenka from holding executive or director positions in any listed firm, citing the abuse of their position and the siphoning off of funds for personal benefit. Zee appealed Sebi’s order in a higher appellate authority and received a partial reprieve in October, allowing Goenka to hold an executive position during the ongoing probe.
The failed merger not only deprived Sony of access to Zee’s extensive content library in regional Indian languages but also underscored Zee’s financial challenges. The company’s full-year profit plummeted by 95% in the twelve months to March 31, reporting a profit of 585.4 million rupees for the quarter ended December 31, missing analyst estimates.
