BENGALURU (Reuters) -Shares of India’s Zee Entertainment fell nearly 7% on Tuesday, a day after the markets regulator barred its promoters from holding board positions in any listed company for one year, potentially delaying its merger with a unit of Sony.
The Securities and Exchange Board of India (SEBI) on Monday said that Zee group promoters Subhash Chandra and Punit Goenka were actively involved in diverting company funds to the group’s related entities.
Sony and Zee decided to merge their television channels, film assets and streaming platforms in late 2021. However, the deal has been delayed due to reasons including a legal battle with lenders over loan defaults by a Zee group entity and reports that stock exchanges were reconsidering approvals for the merger.
Punit Goenka was slated to become the merged entity’s managing director and chief executive as part of the deal.
While Chandra and Goenka can appeal against the order, SEBI’s ban will be a pain point in its merger with Sony, said Amit Kumar Gupta, founder and chief investment officer at Delhi-based equity research firm Fintrekk Capital.
Zee’s board is currently reviewing the SEBI order, and appropriate legal advice is being sought in order to take the next steps as required, Chairman R. Gopalan said in a statement.
In February, an Indian tribunal put on hold insolvency proceedings initiated by lender IndusInd Bank Ltd against Zee, in a major relief for the media company. Later, the company settled its dispute with the lender.
Goenka said in February that the focus of the company continues to be the timely completion of the proposed merger with Sony.
Zee shares recovered some losses and were trading down 1.7%, as of 10:29 a.m IST.
(Reporting by Sethuraman NR and Biplob Kumar Das in Bengaluru; Editing by Nivedita Bhattacharjee and Sonia Cheema)
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