Bengaluru: Shares of Indian media company Zee Entertainment Enterprises Ltd sunk to a 17-month low on Thursday after the company was admitted into insolvency proceedings, possibly delaying a merger with the local unit of Japan’s Sony Group Corp.
Zee and Sony’s Indian unit are merging their television channels, film assets and streaming platforms to take on the likes of Netflix and Disney in India.
Zee Entertainment and the Sony Group did not immediately respond to Reuters’ request for comment.
Zee‘s shares, which have lost about 22 per cent so far this year, tumbled as much as 14.4 per cent before paring some losses. They were last down 9.2 per cent.
The bankruptcy proceedings come after IndusInd Bank Ltd filed a petition with the national company law tribunal against Zee over a default of 830.80 million rupees ($10.04 million).
Zee had provided commitments for funding shortfalls in a debt service reserve account for Siti Networks, which had availed loans from various banks, multiple exchange filings show.
Both Siti and Zee are part of the conglomerate Essel Group.
The nature of financial cases pending will only delay the merger process with Sony, which is a big overhang for Zee‘s stock and its valuation multiples, Elara Capital analyst Karan Taurani said in a note.
In a worst-case scenario, the Zee management can settle the claims to expedite the merger process. But that seems highly unlikely for now, Taurani said, adding that he did not foresee any reason for the merger being called off.
Zee had informed the exchanges in December that IDBI Bank filed an application under insolvency proceedings against the company over a default of 1.5 billion rupees for a loan availed by Siti. – Reuters
($1 = 82.7710 Indian rupees)
(Reporting by Nandan Mandayam and Nallur Sethuraman and Praveen Paramasivan in Bengaluru; Editing by Janane Venkatraman and Eileen Soreng)
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