SEBI has discovered a significant shortfall of over $240 million in Zee Entertainment Enterprises Ltd.’s accounts, further complicating the company’s already tumultuous situation following the collapse of its merger with Sony Group Corp’s local unit. This revelation has triggered a sharp decline in Zee’s shares.
The investigation focused on Zee’s founders has revealed that approximately 20 billion rupees ($241 million) might have been diverted from the company. This amount, ten times greater than initially estimated by Sebi investigators, indicates a severe financial irregularity.
Zee’s stock plummeted by as much as 15% in Mumbai trading, marking the sharpest decline in a month, before recovering some losses. Meanwhile, the broader S&P BSE Sensex remained marginally positive.
However, the exact amount missing is subject to change pending further review of responses from company executives. Sebi has summoned senior Zee officials, including founders Subhash Chandra and Punit Goenka, along with some board members, to explain.
While Sebi and Zee declined immediate comment, the latter stated that it cooperated with Sebi’s inquiries.
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These developments compound challenges for Punit Goenka, Zee’s CEO, as he attempts to reassure investors following the collapse of the $10 billion merger with Sony. Efforts to revive the merger face hurdles due to unresolved differences between the two entities.
The regulatory scrutiny stems from allegations of financial improprieties involving the father-and-son duo. Sebi’s previous order barred the founders from holding executive or directorial roles in any listed company, citing abuse of position and fund diversion for personal gain. However, a partial reprieve in October allowed Goenka to retain an executive position during the ongoing probe.
The failed merger disrupted Zee’s growth prospects and exacerbated its financial woes, with a drastic 95% drop in full-year profit. Despite a modest profit reported for the quarter ended December 31, Zee’s performance fell short of analyst expectations, underscoring the challenges ahead for the embattled media firm.
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