A day after ending the session 8% higher, shares of Zee Entertainment Enterprises (ZEEL) today hit the 10% lower circuit amid reports that markets regulator Sebi has unearthed a $241 million accounting issue at the media firm.
Sebi investigation into Zee founders revealed $241 million may have been diverted from the company, Bloomberg reported. Read here
Zee shares rallied on Tuesday after ET reported that the company has re-engaged with Sony Group Corp in a last-ditch attempt to revive their failed $10 billion mega-merger. Later in the evening, Zee denied the talks which also added to the selling pressure.
Earlier on January 23, Zee shares had crashed 33% to a 52-week low of Rs 152.5 to record its worst single-day fall in history. Over the next few days, some bottom fishing was noticed on expectations that Zee will draw other suitors for potential deals.
The proposed merger of Zee and Sony had led to a valuation re-rating of Zee in anticipation of an improvement in corporate governance and significant merger synergies.
The stock has been the subject of multiple de-ratings and sell calls since the Sony deal was terminated. CLSA had downgraded Zee to SELL from BUY with a revised target price of Rs 198, Nuvama also reduced its FY25E/26E EPS on Zee by 16%/24% and downgraded the stock to reduce rating with a target price of Rs 190.
Elara had downgraded Zee to sell with a target price of Rs 170 while Motilal Oswal had also downgraded the stock to neutral with a target price of Rs 200.
In the December quarter, Zee had reported 141% YoY growth in its consolidated net profit at Rs 58.5 crore while its revenue fell 3% YoY to Rs 2,045 crore. The company anticipates a gradual recovery in margins to start reflecting from H2 FY25 while aspiring to register an EBITDA margin of 18-20% for FY26, along with 8-10% revenue CAGR going forward.
Though the company is actively implementing measures to revive the business and efficiently run business operations as a stand-alone entity, analysts say concerns around weak financial positioning, corporate governance, and litigation outcomes continue to remain.
