Why Zeel Share Price is Falling

The consensus across Indian markets is that inflation has dropped, and the Reserve Bank of India (RBI) is ready to start cutting interest rates.

Investors are positioning themselves to benefit from rising asset prices.

The media has already started writing about Indian market's record run to continue.

In this booming market, a sore loser that has trapped more than 4 lakh investors is Essel group company Zee Entertainment Enterprises (ZEE).

In the past five days, ZEE share price has fallen over 11%. In 2024 so far, the stock is already down 41%.

Let's find out why Zee Entertainment shares are under pressure.

# Accounting Issue

On 21 February 2024, Zee Entertainment shares crashed over 14% after overnight reports suggested that the market regulator has found US$241 million (Rs 2,000 crore) worth of funds being diverted from the company.

The markets regulator subsequently summoned several former directors of Zee Entertainment as part of its probe for this fund diversion.

Later in the day, Zee Entertainment clarified about the reports that saying the report was "incorrect" and that the company was not involved in any new negotiations.

This didn't do any good as Zee has come under corporate governance issues in the past.

In August 2023, the market regulator passed an order against the company's promoters, barring them from holding any directorships in listed companies.

The promoters came under scrutiny after illegally withdrawing Rs 2 billion for their own benefit, at least that's what reports suggest.

# Merger Goes Down the Drain

The current fall was owing to the accounting issue. But the major sentiment shift was seen when Sony called off its merger with Zee.

Last month, Sony scrapped the US$10 billion merger of its Indian arm with Zee Entertainment because Zee failed to meet some financial terms of the deal.

This merger was expected to create a powerhouse so big that India was almost set to see 90-plus channels across sports, entertainment and news.

Sonly filed a 62-page notice, saying several breaches of the merger agreement were "not remediable and any further attempts to mutually discuss would be an empty formality, especially given ... plain denial (by Zee) and failure to provide a proposal to protect" Sony's interests.

What Next?

Earlier this month, the company posted its Q3 earnings. The media conglomerate's net profit more than doubled to Rs 585 million for the third quarter.

In the earnings call, its CEO Punit Goenka said Zee is charting a three-pronged approach - cutting costs, reducing overlaps between businesses, and enhancing quality to regain margins following collapse of the merger with Sony Pictures Entertainment.

The management also outlined a recovery plan, with margin recovery visible from the second half of financial year 2025.

As things stand now, the merger collapse has impacted the stock a great deal while the recent accounting issue was the final nail in the coffin for Zee.

From a fundamental standpoint, the company's topline has languished near the same level for years while margins are on the decline for years.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	79,339	81,299	77,299	81,857	80,879
Growth (%)	19%	2%	-5%	6%	-1%
Operating Profit	28,190	16,585	17,043	18,968	11,866
OPM (%)	36%	20%	22%	23%	15%
Net Profit	15,671	5,265	8,001	9,646	478
Net Margin (%)	20%	6%	10%	12%	1%
ROE (%)	19.0	5.8	8.2	10.1	2.3
ROCE (%)	26.8	11.0	12.8	14.5	5.0
Dividend (Rs)	3.5	0.3	2.5	3.0	0.0
Debt to Equity (x)	0.1	0.1	0.0	0.0	0.0

Data Source: Ace Equity

All this chaos surrounding Zee could result in FIIs divesting their stake from the company. In the December 2023 quarter, FIIs reduced their stake to 28% from 35% in September 2023.

How Zee Entertainment Share Price has Performed Recently

In 2024 so far, Zee shares are down over 40%. In the past five days, the stock has fallen around 11%.

Today, Zee shares reversed coursed and gained 3% in a falling market.

Zee Entertainment has a 52-week high of Rs 299 touched on 12 December 2023 and a 52-week low of Rs 152 touched on 23 January 2024.

Here's a table comparing Zee with its peers -

Comparative Analysis

Company	Zee Ent	GTPL Hathway	Network 18 Media	Sun TV	TV18 Broadcast
ROE (%)	2.3	11.7	-2.0	19.6	2.7
ROCE (%)	4.9	14.9	4.1	26.3	3.4
Latest EPS (Rs)	-0.7	7.3	-1.9	47.9	0.2
TTM PE (x)	0.0	27.5	-	12.7	282.1
TTM Price to book (x)	1.5	1.9	0.9	2.3	0.6
Dividend yield (%)	0.0	2.0	0.0	2.5	0
Industry PE	0.0
Industry PB	1.4

Data Source: Ace Equity

About Zee Entertainment

Zee Entertainment Enterprises is a media and entertainment company engaged in providing broadcasting services. It is one of India's leading media and entertainment companies.

The company operates through content and broadcasting segment.

In the year 1992, the company launched their flagship television channel Zee TV. Since then, they have transformed itself into an integrated media conglomerate with operations spanning the entire media spectrum.

It isy involved in the broadcasting of satellite television channels, the space selling agent for other satellite television channels, and the sale of media content.

To know more about Zee Entertainment, check out its factsheet and its latest quarterly results.

You can also compare Zee with its peers:

Zee Entertainment vs Zee Media Corp

Zee Entertainment vs Network18 Media

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