The Aryavarth Express
Agency(New Delhi): India’s market watchdog, the Securities and Exchange Board of India (SEBI), has uncovered a preliminary finding that Zee Entertainment Enterprises has diverted an astonishing 20 billion rupees ($240 million) from its accounts. This revelation has led to the founders of Zee Group being summoned for questioning, as informed by two individuals with direct knowledge of the situation.
The detected amount of diversion is ten times larger than what investigators initially estimated, according to one of the sources. Following this news, Zee Entertainment’s shares plummeted by 11% in Wednesday morning’s trading. This drop is a continuation of a recent sharp decline in the company’s stock value, exacerbated by the collapse of its $10 billion merger with Sony Group last month, a deal abandoned by the Japanese firm.
Last year, SEBI accused Zee Group’s founders, former Chairman Subhash Chandra and his son, the current CEO Punit Goenka, of actively channeling funds from the company to other entities associated with the group and its founding shareholders. Both Chandra and Goenka have denied any involvement in such activities.
In response to these allegations, Zee Entertainment has issued a statement, categorically denying any accounting discrepancies, and has committed to providing all requested information to SEBI. Both Chandra and Goenka have not provided comments on these developments.
The final findings and consequent penalties from SEBI are expected to be announced in mid-April, as per the second source. The termination of the proposed merger between Sony’s local unit and Zee was primarily due to unresolved “closing conditions” and leadership disputes, including disagreements concerning Goenka’s role in regulatory matters. Since the abandonment of the merger, Zee’s shares have experienced a 25% decline.
The Economic Times of India reported that Zee was making a last-ditch effort to reinitiate talks with Sony to revive the deal, which Zee has denied. In October, an Indian tribunal lifted a restriction that prevented Goenka from holding board positions, giving SEBI eight months to complete its broader investigation. The news of the $240 million discrepancy in Zee’s financials was first reported by Bloomberg.