Shares of Zee Entertainment tanked 6.6% on Tuesday’s early trades to reach an intraday low of ₹ 182.00 apiece on the National Stock Exchange (NSE) after the Securities and Exchange Board of India (SEBI) barred Essel Group Chairman Subhash Chandra Goenka and Zee Entertainment’s head Punit Goenka from holding any key managerial position until further notice.
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An interim order was passed against them following investigations which revealed that they abused their position as directors of Zee Entertainment in 2019 by siphoning off funds for their own benefit. Though the promoters hold merely a 3.99% stake in the company, Subhash Chandra and Punit Goenka continue to be at the helm of affairs of the company.
Pursuant to the interim order, SEBI has given both individuals 21 days to file their replies in this regard.
In November 2019, Sunil Kumar and Neharika Vohra – two independent directors of Zee Entertainment resigned from their posts after raising several issues, including the appropriation of certain fixed deposits of the company by YES Bank for squaring off loans of related entities of the Essel Group.
Vohra alleged that guarantees were given to a subsidiary without approval from the board. Thereafter, Chandra, the then chairman of Zee Entertainment, provided a ‘Letter of Comfort’ towards credit facilities availed by certain group companies from Yes Bank.
SEBI found out that both Chandra and Goenka were signing comfort letters on behalf of Zee Entertainment without informing, consulting, or taking approval from the board, thereby violating the disclosure norms.
Zee Entertainment Enterprises is engaged in the business of broadcasting Satellite Television Channels, space selling agents for other satellite television channels, and the sale of media content i.e. programs/film rights/feeds/music rights.
With a market capitalization of ₹ 18,716 crores, Zee Entertainment is a mid-cap company. It has a low return on equity of 2.33% and an ideal debt-to-equity ratio of 0.03. Foreign institutions hold a 36.39% stake in the company, Mutual funds hold 27.88%, retail investors hold 21.88%, other domestic institutions hold 9.86% and the rest is held by the company’s promoters.
Written By Simran Bafna
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