India’s market regulator, the Securities and Exchange Board of India (SEBI), has found a financial problem of about Rs. 2,000 crore in Zee Entertainment Enterprises’ accounts. This issue surfaced shortly after Zee’s merger with Sony’s India unit collapsed.
As part of its investigation into the Zee founders, the Securities and Exchange Board of India, or SEBI, found that about ₹2,000 crore ($241 million) may have been diverted from the company, said people familiar with the matter who did not want to be identified as the information is not public yet. That’s roughly ten times of what was initially estimated by Sebi investigators, the people said.
What Zee Entertainment said?
However, Zee has refuted media reports that claimed a $240 million, or Rs 2,000 crore ‘accounting hole’ and termed it incorrect and false.
“Reports and rumours pertaining to accounting issues in company are incorrect and false. We are in process of providing all comments requested by SEBI and have extended complete co-operation on all aspects,” news agency Reuters quoted the company as saying.
Amount Under Scrutiny
SEBI is still investigating, so the exact amount might change. They’re reviewing responses from company leaders to get a clearer picture.
SEBI’s Call for Explanation
SEBI has asked top Zee officials, including founder Subhash Chandra, his son Punit Goenka, and some board members, to clarify these financial irregularities. While a Zee representative didn’t comment on the diversion of funds, they confirmed Zee’s cooperation with SEBI’s investigation.
Impact on Zee-Sony Merger
Zee and Sony India are discussing reviving their $10 billion merger, which fell through recently. SEBI’s new claims about fund diversion could complicate these talks. The merger would benefit Sony by giving it access to Zee’s extensive content library in various Indian languages.
Financial Performance of Zee
Zee’s financial performance hasn’t met analyst expectations. They reported a 95% profit drop for the full year up to March 31 and a profit of Rs. 58.5 crore for the quarter ending December 31.
Tensions and Stand-off
The regulatory investigation into alleged financial misconduct involving Zee’s top executives has strained relations between Sony and Zee since mid-2023. Sony has been reluctant to let Goenka lead the merged company. Goenka, however, insists on his promised CEO role. This deadlock led to the termination of the deal in January.
SEBI’s Previous Actions
In August, SEBI barred Zee founders Chandra and Goenka from holding executive or director positions in any listed company. SEBI cited “abuse of their position” and diversion of funds for personal gain as reasons for the ban.
