India’s market regulator found a hole of more than $240 million in the accounts of Zee Entertainment Enterprises Ltd., dealing another blow to the concerned media company less than a month after its merger with the local unit of Sony Group Corp collapsed.
As part of its investigation into Zee’s founders, the Securities and Exchange Board of India, or Sebi, found that about 20 billion rupees ($241 million) may have been diverted from the company, said people familiar with the matter, who did not wanted to be identified because the information is not yet public. That is about ten times more than initially estimated by Sebi investigators, the people said.
The amount found missing is not final and may change after Sebi reviews the responses of the company executives, the people said. The regulator has summoned senior officials at Zee including founders, Subhash Chandra, his son Punit Goenka and some board members to explain its stand, they added.
A Sebi representative did not immediately respond to an emailed request for comments. A Zee spokesperson declined to comment on the fund diversion but said in an email that the company “was in the process of providing all comments, information or clarifications requested” by the market regulator in the ongoing investigation.
Sebi’s latest findings add to Goenka’s woes as the Zee CEO tries to reassure investors after its $10 billion merger plan with Sony fell apart. The transaction, two years in the making, was finalized in January after a months-long standoff over who would lead the new entity.
Lots of Bickering
The regulatory probe into the alleged financial improprieties of the father-son duo has led to much wrangling between Sony and Zee since mid-2023. It made Sony wary of letting Goenka head the merged entity while Goenka refused to budge as the CEO spot was promised to he in the 2021 merger pact. The standoff ultimately led to Sony scrapping the deal in January.
Sebi, in an order in August, barred Zee’s founders – Chandra and Goenka – from holding offices or directorships in any listed company after finding that they had “abused their position” and siphoned off funds “for their own benefit”.
Zee appealed Sebi’s order in a higher appellate authority and got a partial stay in October that allowed Goenka to hold an executive position while the probe was underway.
The merger would strengthen Sony by giving it access to Zee’s deep library of content in regional Indian languages while improving Zee’s financial health. Zee’s full-year profit fell 95% in the twelve months to March 31. It reported a profit of 585.4 million rupees for the quarter ended December 31, but missed analyst estimates.
–With help from Preeti Singh.