Zee Entertainment Denies Alleged Rs 2,000 Cr Accounting Error, Labels Report As ‘False’; The Never Ending Saas Bahu Serial With No Climax In Sight!

While there is no clear outcome of the ZEE-Sony merger, Zee Entertainment has entered yet another controversy with mounting concerns over alleged financial discrepancies amounting to Rs 2,000 crore as per SEBI, prompting the company to issue a firm rebuttal. However, it is more than just about the Zee-Sony fiasco; there is a deep-seated frustration with the perceived inadequacies of the regulatory body, SEBI. SEBI's inability to construct airtight cases, despite extensive investigations spanning months or years, raises serious doubts about its effectiveness in upholding market integrity and protecting investor interests. Moreover, the frequent leakage of premature information on investigations, coupled with a perceived lack of focus on gathering concrete evidence to prove frauds committed by promoters, further raises doubts and undermines confidence in SEBI's capabilities.

The events surrounding Zee Entertainment seem like a typical saas-bahu serial that mimics exaggerated emotions, uncanny plots and twists just to keep the viewers entertained.
However, perhaps, the storyline is now losing its sheen and instead, has people wondering – why does SEBI fail every time?


In the latest, Zee Entertainment has refuted recent media reports alleging a significant accounting discrepancy of Rs 2,000 crore, dismissing them as inaccurate and baseless.

According to a statement the company clarified, “Reports suggesting accounting irregularities within the company are unfounded. We are actively cooperating with SEBI and are in the process of providing comprehensive responses to all queries.”

The Actors
The denial from Zee comes amidst revelations by the Securities and Exchange Board of India (SEBI) regarding a substantial financial discrepancy at Zee Entertainment Enterprises Ltd.

The revelation has introduced a new plot and adds further pressure on the media conglomerate following the collapse of its merger with Sony Group Corp’s local unit just weeks prior.

Apparently, SEBI’s investigation into Zee’s founders has uncovered a potential diversion of funds amounting to approximately Rs 2000 cr.
As per sources familiar with the matter revealed, this figure exceeds initial estimates by Sebi investigators by a factor of ten.

The reported missing amount remains tentative, pending further review of responses from Zee executives. In the interim, SEBI has summoned senior officials, including founders Subhash Chandra and his son Punit Goenka, along with certain board members, to clarify their position on the matter.

These recent developments compound the challenges facing Goenka, the CEO of Zee, who is striving to reassure investors following the collapse of the $10 billion merger with Sony. The termination of the merger, which had been in the works for two years, occurred in January amid protracted negotiations over leadership of the combined entity.

Zee Entertainment, SEBI, Punit Goenka

The Twisted Plot
Amidst ongoing regulatory scrutiny into alleged financial misconduct involving a father-and-son duo, tensions between Sony and Zee have escalated since mid-2023.

Sony became apprehensive about entrusting Goenka with leadership of the merged company, while Goenka, citing a prior merger agreement, stood firm in demanding the CEO position. This impasse ultimately resulted in Sony terminating the deal in January.

In August, SEBI issued an order prohibiting Zee founders Chandra and Goenka from holding executive or directorial roles in any listed company, citing their misuse of authority and diversion of funds for personal gain.

Zee challenged SEBI’s ruling, securing a partial reprieve in October allowing Goenka to retain an executive role pending the ongoing investigation.

The proposed merger aimed to benefit Sony by granting access to Zee’s extensive content library in regional Indian languages, while also bolstering Zee’s financial stability.

However, Zee’s full-year profits plummeted by 95% in the twelve months leading to March 31. Although reporting a profit of 585.4 million rupees for the quarter ended December 31, Zee fell short of analyst expectations.

The Exaggerated Emotions
In a surprising turn of events, Zee Entertainment has said to have resumed discussions with Sony Group Corp in a final effort to revive their $10-billion merger, officially called off on January 22.

Representatives from both parties have convened meetings in various locations in Mumbai, intensifying efforts to salvage the deal over the past two weeks. Despite this, significant disparities remain unresolved, raising the possibility of renewed talks faltering, with both sides maintaining steadfast positions, according to executives familiar with the situation.

Zee Entertainment is poised to communicate its decision to Sony within the next 24 to 48 hours, as per reports regarding its willingness to accept all terms, including conditions precedent (CPs), and proceed with the merger.

Alternatively, suppose Zee opts not to comply with the terms. In that case, Sony is expected to withdraw its original merger application, which was lodged with the National Company Law Tribunal (NCLT) over two years ago when the merger agreement was first reached.

Should a reconciliation be achieved, ongoing legal actions initiated by both parties, including proceedings at the Singapore International Arbitration Centre (SAIC) and the NCLT, would be terminated.

The Saas And The Bahu
One significant point of contention revolves around a $300 million write-off concerning cricket rights, which must be resolved before any agreement is finalized. While Sony advocates for an immediate write-off or impairment, Zee is advocating for a postponement of this action.

To add more, Punit Goenka, the Managing Director and CEO of ZEEL, is reported to have conceded his previous demand to be appointed CEO of the merged entity.

Sony had vehemently opposed this appointment until Goenka’s exoneration from allegations of fund diversion from Zee to closely held companies within his family’s Essel Group. Instead, Sony suggests Goenka’s role be limited to that of an advisor.

Disagreements persist regarding the fulfillment of certain outstanding CPs, with Zee pressing for any agreement to be legally binding once signed, while Sony hesitates to make such a commitment.

The original agreement, forged in late 2021, has seen substantial value depreciation and deteriorating financials, prompting Sony’s reluctance to enter further binding agreements.

However, Zee’s senior leadership remains optimistic about the company’s trajectory, citing a significant improvement in net profit during the quarter ending in December, which surged by 141% to Rs 58.5 crore despite a 3% dip in revenue to Rs 2,045 crore.

Additionally, the streaming arm ZEE5 has shown promising growth, with the operating loss in Q3 narrowing by 13.4% to Rs 244 crore while revenue increased by 15% to Rs 223 crore.

During an investor call on February 13th, Goenka expressed his desire for the merger to proceed, highlighting various efforts made to divest or close profitable businesses both domestically and internationally. Despite personally presenting several proposals and solutions to Sony to address their concerns, they were unfortunately not accepted.

The Inhouse Fight
Following the breakdown of merger discussions last month, Mad Man Film Ventures, identified by Sony as a proxy for Zee, petitioned the NCLT to enforce the merger scheme between Sony and ZEEL.

In response, Sony’s Indian subsidiaries, Culver Max Entertainment and Bangla Entertainment, have filed counter-applications challenging the validity of ZEEL’s plea for merger implementation.

ZEEL, in a plea dated January 24th to the NCLT, requested the tribunal to prevent Sony Group-owned entities from taking any actions that could hinder the merger scheme’s execution.

The Mumbai bench of the NCLT has combined ZEEL’s petition with that of shareholder Mad Man Film Ventures, scheduling a hearing for March 12th, according to reports from February 6th.

Additionally, Mad Man Film Ventures has urged the tribunal to appoint a committee comprising two directors each from Zee and Sony to oversee the merger’s implementation.

On February 4th, the SIAC rejected emergency interim relief sought by Sony Group-owned entities against Zee, citing lack of jurisdiction to prevent Zee from approaching the NCLT. The tribunal is deemed the appropriate authority to resolve the dispute.

The Goenka family holds a 3.99% stake in ZEEL, while the remaining shares are owned by public and institutional investors.

Following the termination of merger talks on January 22nd, Zee’s stock initially rose by up to 14%. However, it has since declined by 24% over the past month. Indian mutual funds and insurance companies, including LIC, collectively hold 31% of ZEE’s shares, while FIIs held 28.19% as of December 2023.

Following the collapse of the merger, Zee announced plans during its third-quarter earnings call to reassess its entire business portfolio.
“We will be reviewing the entire portfolio of the business to determine which segments will provide the greatest value to our portfolio. Consequently, we will identify areas of focus and those that are not,” Goenka informed analysts.

The Viewpoint
In this entire ping pong game akin to Indian evening entertainment, SEBI emerges yet again!

Let Us Consider some important points – 

1) There emerges a deep-seated frustration with the perceived inadequacy of the regulatory body – SEBI.

2) SEBI has time and time again proved its incompetency and raises serious questions about its efficacy in upholding market integrity and investor protection.

3) Despite extensive investigations spanning months or even years, SEBI consistently fails to construct strong cases that can withstand judicial scrutiny.

4) The result – overturning many of SEBI’s imposed bans by courts due to purportedly flawed investigations- is seen as a significant failure, raising doubts about the regulator’s ability to fulfil its mandate.

5) Moreover, there is a pattern of premature information being leaked on its investigations instead of focusing on gathering concrete evidence, which is deeply troubling.

6) This raises concerns about the integrity of SEBI’s investigative processes and whether its actions are driven more by publicity than by a genuine commitment to addressing financial misconduct.

7) The perceived lack of focus on proving frauds committed by promoters through thorough evidence-gathering deepens doubts about SEBI’s competence and priorities.

Is it time to dock SEBI?

Many are now waking up to a profound disillusionment with SEBI’s performance and an urgent call for systemic reform, prompting reflection on whether SEBI’s current structure, practices, and enforcement mechanisms are adequate to fulfill its regulatory responsibilities effectively.


Coming back to Zee, there is a pressing demand to initiate stern action against individuals perceived as responsible for fraudulent activities, such as Subhash Chandra and his son Punit.

It raises fundamental questions about accountability and justice within the financial system, and immediate action is necessary to protect other shareholders of the company, spotlighting the urgency of addressing alleged wrongdoing and restoring trust in corporate governance.

What about the broader implications of allowing a minority of equity holders to potentially exploit the majority, stressing the need for robust regulatory intervention to safeguard investor interests and market integrity?

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