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Tag: SAT

  • SAT sets aside SEBI order against ZEE promoters

    SAT sets aside SEBI order against ZEE promoters

    Mumbai: SAT has quashed SEBI’s order of barring Punit Goenka from holding key directorship in listed entities over the alleged fund-diversion case.

    Our view

    Implications of the event

    Scenario 1- This may expedite the Zee/Sony merger process; if SEBI gives a go ahead in favour of Punit Goenka, without going to the Supreme Court, post the detailed order that is to be released tonight. In this case, we expect the record date to be announced around last week of November 23. This in turn means that the listing of the merged co. will happen towards the first week of Jan ’24. Further, with Goenka coming on Board, there will be no need for any changes in the term sheet, or any Board/shareholder approval required for change in CEO; this also means that business will be as usual for ZEE and lesser transition time with little change in senior management.

    Scenario 2- SEBI can also move to the Supreme Court to appeal for a stay against SAT’s order. Further, the SAT order may only mention that Goenka can continue as CEO of Zee or the merged co; however, SEBI’s investigation on grounds of fraud may continue after this relief by SAT. This in turn means that there is still a high likelihood of the merger going through without Goenka. We believe there is a low likelihood of Sony allowing Goenka to continue as CEO of the merged Co, unless the issue with SAT is resolved (in case of SEBI going to Supreme Court). In this case, there may be a delay in the merger too, if Goenka changes his stance  and waits for the outcome of investigation; if Sony does not wait, then merger will go through as usual and the merged co will get listed by Jan’24

    Change in media landscape – a big benefit for Zee/Sony

    With Reliance wanting to acquire Disney, the media landscape on TV/OTT side will see a big consolidation as two large players – 1) TV18/Disney and 2) Zee/Sony could potentially command a market share of 67%/53% (TV18/Disney and Zee/Sony together) on TV/OTT in India; which could shift bargaining power in their favour and help them grow ahead of industry averages, as other players may scale down in the ecosystem

    No overhang of CG issues

    With Sony coming as a parent company, we expect no CG (corporate governance) issues in the future, which in turn will drive re-rating of valuation multiples for Zee.

    The stock has corrected more than 10 per cent from its peak over the last three months post the NCLT approval in Aug’23, citing delay on the merger. We await 1) the detailed order and 2) SEBI’s response on the above judgement order passed by SAT to allow Goenka to be a part of Z to assess the actual impact of the above decision for the merger and Goenka; we have a BUY recommendation on Zee with a Sept 24 TP of Rs 340 – we will await more developments over the near term on above.

    Background of the event

    • On 12 June 2023, SEBI banned ZEE promoters Chandra & Goenka from holding directorial, key managerial roles over allegations of fund siphoning. On 13 June 2023, ZEE promoters approached SAT against the order following which SAT provided SEBI 48 hrs. to file a reply against ZEE’s plea.

    • On 10 July 2023, two weeks of time were provided by SAT to ZEE promoters to file a response against the interim order. Meanwhile ZEE formed an interim committee of senior executives to run operations at the company.

    • On 14 August 2023, SEBI asked for 8 months of time to complete investigation of alleged fund diversion by Zee promoters (due to significant red flags in the transactions between Zee and Essel entities) which was again challenged by ZEE on 26 August 2023.

    • On 27 September 2023, SAT reserved order on the case after hearing from both the parties.

    • On 30 October 2023, SAT quashed SEBI’s order barring Goenka from holding key directorship in listed entities over the alleged fund-diversion case.

    The credit of this article goes to Elara Capital SVP Karan Taurani

  • MNC media juggernaut arrives

    MNC media juggernaut arrives

    Mumbai: The National Company Law Tribunal’s (NCLT) approval for the Zee Entertainment -Sony merger without conditions offers further respite for Z valuation, which has been muted for the past two years (the stock has not given any absolute returns). The company will now move to Registrar of Companies to file for the merged entity once the final NCLT order is released; in the interim, we await the outcome of the SEBI and SAT cases against the Goenka family, the promoter, which may not have any adverse impact on the merger, as Punit Goenka has already stepped down from the Board; in a worst case scenario, the Board and shareholders will appoint a new CEO in case SAT order is against Punit Goenka. Post the regulatory approvals, Z will be delisted, and the merged company will be relisted as Sony-Zee wherein 100 shares of Z will enable shareholders to get 85 shares of the merged entity (~2-3 months process). We do not expect any change in the deal contours despite the long delay, as NCLT has approved the scheme. Further, Sony will get a majority shareholding of 50.8 per cent in the merged entity whereas the Goenka family’s stake will move up to 3.99 per cent, which includes the non-compete fee. We do not expect any impact from creditors filing a case against the NCLAT order.

    Moat remains for the merged company

    Z-Sony commands an ad market share of 24 per cent as on CY22, below the other large peer, Star-Disney, which is at 33 per cent; formation of a large entity on the broadcasting side would lead to cost and revenue synergy, which would offset the negative impact of lower growth rates (India TV ad revenue CAGR has been flat over FY20-23).

    Valuation: reiterate Buy with a higher TP of Rs 340

    We expect better execution in terms of strategic initiatives, due to global expertise and better CG (corporate governance) initiatives , which should propel higher cashflow. We do not expect Z-Sony valuation moving to 32- 33x fwd. P/E (peak valuation multiple in FY18). This is because India’s media landscape has changed with 1) TV broadcasting growth rates converging, and 2) digital business offering limited opportunity for monetization & scale due to disruption; however, we expect the negative impact to be offset by: 1) the merged company, and 2) an MNC-backed firm, which would lead to P/E at a 40 per cent discount vs peak (32x one-year forward). We introduce FY26E for the merged entity and value the core broadcasting business at 20x (from 17x) one-year forward P/E (potential exit of Disney from linear TV may enable Z-Sony to gain market share). We rollover to 24 Sept (since synergies will take some time to kick in) SOTPbased TP of Rs 340 from Rs 300 (after factoring in higher sports losses), with a cash infusion from Sony, synergy and valuing the OTT business 4x one yr. fwd. EV/Sales; our PAT estimate incorporates potential OTT losses.

    The credit of this article goes to Elara Capital SVP Karan Taurani.

  • Axis Finance moves to NCLAT – more noise, no impact

    Axis Finance moves to NCLAT – more noise, no impact

    Mumbai: Axis Finance has approached the National Company Law Appellate Tribunal (NCLAT), Delhi against the National Company Law Tribunal (NCLT) order approving the merger of Zee and Sony. The NCLAT has served notice to Zee in response to Axis Finance’s plea.

    We believe the above issue of Axis Finance approaching the National Company Law Appellate Tribunal (NCLAT) will not have any impact on the merger between Zee and Sony because the claims being pursued by Axis Finance, which amount to Rs 1,000 mn, are not directed at Zee but rather at its parent company, Essel Group. As mentioned in the NCLT merger order (Zee/Sony), Axis Finance has previously approached various legal bodies, including the Debt Recovery Tribunal (DRT) and high courts, for above claims; however, judgements on the same have not been in their favour (Axis Finance). Therefore, we believe these claims lack merit and will not impact the merger. Also, appeals with NCLAT may continue for months even after the merged company is formed, just like in the case of PVR-Inox merger (Consumer Unity & Trust Society appealed in NCLAT against the merger and the case got dismissed in August 2023 – six months after the merged company of PVRINOX was formed).

    As for the current status of the merger, the merged company is progressing with the Registrar of Companies (ROC) filing process, post receipt of the NCLT merger order. They are also engaged in discussions regarding Closing Precedents (CP) (the merged company may want to include July/August financials as well), which may result in a delay of two to three weeks in the merger timeline. We believe the record date is usually given one week prior to delisting. Considering the marginal delay in CP, the record date for the merger could be towards the last week of October 2023. Subsequently, relisting is expected to take place in the first or second week of December 2023 vs our earlier expectation of the second week of November 2023. Additionally, the company will need to submit details of the merged co. Board of Directors to the Ministry of Information & Broadcasting (MIB), before the record date is finalised.

    Further, the SEBI/SAT issue (with promoters) too may not impact the merger timelines as the NCLT merger approval is without any condition.

    We have a BUY recommendation on Zee with a 24 Sept TP of Rs 340 – we maintain our positive stance on the company; PFA our latest company update post the NCLT merger approval.

    The credit of this article goes to Elara Capital SVP Karan Taurani.

     

  • SC stays recovery of Rs 27 crore SEBI penalty from NDTV’s Prannoy, Radhika Roy

    SC stays recovery of Rs 27 crore SEBI penalty from NDTV’s Prannoy, Radhika Roy

    NEW DELHI: The Supreme Court on Friday put a stay on the recovery of Rs 27 crore as penalty from NDTV promoters Prannoy Roy and Radhika Roy and their holding company, reported Live Law. The penalty was imposed in December last year by the Securities Exchange Board of India (SEBI) for allegedly concealing information from shareholders about certain loan agreements.

    The Roys had filed an appeal against the penalty at the Securities Appellate Tribunal (SAT). In January, the tribunal asked them to deposit 50 per cent of the amount to SEBI within four weeks. Later that month, the promoters moved the Supreme Court against the SAT order and sought to offer shares of their channel to pay up the amount.

    On 15 February, the apex court had exempted the promoters from making the deposit for hearing at the SAT.

    The bench comprising justice DY Chandrachud asked the Roys to cooperate in the disposal of the appeal by SAT, which is listed for final hearing on 6 April, Live Law reported.

    Senior advocate Mukul Rohatgi, counsel for the NDTV promoters, laid out the chain of developments in the case to the court. He said that the two promoters had taken a loan of Rs 375 crore from ICICI Bank in 2008, which was repaid by VCPL. The channel owners then took another loan from VCPL for which they did not have to pay interest.

    SEBI had alleged that this led to transfer of control, an information that was concealed from shareholders, amounting to violation of regulatory norms.

    Rohatgi argued against SEBI’s allegation that the promoters had transferred control of the channel to VCPL. “How can I transfer control without any transfer of shares,” the advocate asked, as quoted by Live Law. “I have all the shares.”

    Solicitor general Tushar Mehta, appearing for SEBI, argued that these are not mere allegations, but a 100-page decision against Prannoy and Radhika Roy.

    “They are saying that they have not transferred the shares…Their shares are worthless,” Mehta said. “There is a direction by a statutory regulatory body that penalty has to be paid.”

    He went on to state that the SAT decision asking them to file a deposit amount has been a practice in the tribunal.

    However, justice Chandrachud dismissed the arguments and said that it was “brash” of the SAT to ask for a 50 per cent deposit.

    “There has to be some consistency,” Chandrachud said. “Without any reason, you say 50 per cent deposit… You are exercising the power of stay. You are asking for some amount. There has to be some observations.”

  • NDTV founders appeal interim SAT order in Supreme Court

    NDTV founders appeal interim SAT order in Supreme Court

    NEW DELHI: NDTV founders and promoters Prannoy Roy and Radhika Roy have filed an appeal in the Supreme Court against the interim order dated 4 January 2021 passed by the Securities Appellate Tribunal (SAT). The order directed NDTV to deposit 50 per cent of the fine levied by SEBI.

    The SAT order said, “Deposit 50 per cent of the disgorged amount before the respondent within four weeks from today. If the said amount is deposited the balance amount shall not be recovered during the pendency of the appeal.”

    SAT further stated that the appeals filed by the founders require consideration and directed to list the matter for final disposal on 10 February 2021.

    Earlier in December 2020, SEBI imposed a fine of Rs 27 crore on NDTV for concealing information from shareholders on certain loan agreements. However, in a regulatory filing, the channel mentioned that the promoters through disclosures to the stock exchanges have repeatedly said that they have never allowed for transfer of NDTV's control and that they continue to own and hold 61.45 per cent of the total paid up share capital in the media entity.

  • SAT directs NDTV founders to deposit 50% of fine before SEBI

    SAT directs NDTV founders to deposit 50% of fine before SEBI

    NEW DELHI: Following appeals by NDTV founders and promoters Prannoy Roy and Radhika Roy against the Securities and Exchange Board of India (SEBI) order of Rs 27 crore fine for alleged non-disclosure of loan agreements, the Securities Appellate Tribunal (“SAT”)  has held that the pleas require consideration. The matter has been listed for final disposal on 10 February 2021.

    Meanwhile, SAT has directed NDTV to “deposit 50 per cent of the disgorged amount before the respondent within four weeks from today. If the said amount is deposited the balance amount shall not be recovered during the pendency of the appeal.”

    The founders have decided to file an appeal in the Supreme Court against the aforesaid SAT order.

    Earlier in December 2020, SEBI imposed a fine of Rs 27 crore on NDTV for concealing information from shareholders on certain loan agreements. However, in a regulatory filing, the channel mentioned that the promoters through disclosures to the stock exchanges have repeatedly said that they have never allowed for the transfer of NDTV's control and that they continue to own and hold 61.45 per cent of the total paid-up share capital of in the media entity.

  • SAT further stays SEBI’s impugned order against NDTV till next hearing

    SAT further stays SEBI’s impugned order against NDTV till next hearing

    MUMBAI: The Securities Appellate Tribunal has further extended the relief to New Delhi Television news channel’s promoters Prannoy Roy and Radhika Roy, against the impugned order of the Securities and Exchange Board of India till next hearing.

    According to a BSE filing of the NDTV, “The Securities Appellate Tribunal at Mumbai, at a hearing on February 24, 2020, has extended the stay; in operation against the Impugned Order granted vide order dated June 18, 2019, until the next date of hearing.”

    The appeals have accordingly been adjourned, and are now scheduled to be listed on 21 April 2020.

    SEBI on 14 June 2019 had debarred the Roys from holding any key managerial positions in the board or the management of the news channel company for being involved in fraudulent activities.

    SEBI had also debarred both the promoters of the company along with their RRPR Holdings, from accessing the stock markets or selling their holdings in the news channel. The Roys were found to be in violation of NDTV's code of conduct, SEBI had said in its order.

    SEBI had come out with an order after carrying out a detail probe into allegations against the promoters of the company and their holdings for not disclosing material information to the shareholders  about loan agreements entered into with Vishva Pradhan Commercial Private Ltd.