ITV

Tag: Sony

  • Sony’s Shrimad Ramayan and the future of cable TV

    Sony’s Shrimad Ramayan and the future of cable TV

    MUMBAI: Can the recently launched Shrimad Ramayan give a shot in the arm to the struggling pay TV sector, especially cable TV? The jury is out and opinions are mixed, but there’s some movement afoot. One cannot forget that the earlier Ramyan on Doordarshan in the eighties resulted in India’s streets being deserted and during its rerun during the pandemic it attracted 76 million viewers on DD on 16 April 2020.

    According to some cable TV operators, the signs are positive.

    “I am glad that the show has launched as it has,” says Nagpur-based MSO UCN director Ajay Khamankar. “Shrimad Ramayan is only showing on TV which is good. I see a lot of potential in it slowing down the cord-cutting that has been plaguing the pay-TV sector.”

    Mumbai-based MSO and OTT aggregator Sabot promoter  Atul Saraf, however, disagrees. “We are getting some calls, but it’s not ground shifting. One show can’t change the fortunes of the cable TV sector. “

    Khamankar contradicts this by saying that his company’s helplines have seen a lot of traction since 1 January when Shrimad Ramayan premiered with viewers asking for their cable TV connection to be restored. “We have been getting an unusual number of calls from subscribers who had earlier cancelled their subscriptions. It cuts across age groups, which is a good sign,” he highlights.

    Saraf points out that he would like to monitor the situation for a few more weeks before concluding on Shrimad Ramayan being a standout for the cable TV sector. “Normally, we are seeing disconnections daily,” he reveals. “We will have to see whether the signups are more than the sign-outs over time.”

    Shrimad Ramayan has been produced by the Siddharth Kumar Tewary-run Swastik Productions and airs at the premium 9 pm slot Monday to Friday. It stars Sujay Reu as Shri Ram, Prachi Bansal as Sita, and Basant Bhatt as Lakshman.  It premiered on 1 January to rave reviews about its quality of production as well as story-telling. This is why it has been enamouring TV viewers at home. In just its first week, it zoomed up to No. 2 on the Sony ratings chart just behind Wagle Ki Duniya (1.1 TVR, TSV 15 minutes) and on the same rank as Pushpa Impossible (0.9 TVR; TSV: 18 minutes) with a TVR of 0.9  and TSV of 31 minutes.  

    “Obviously, the content is keeping viewers engaged and it can only grow from here,” says a media observer.

    Shrimad Ramayan has also got an IMDB rating of 9.3 which shows a high audience approval. Critics too have given it a thumbs up with some like Tellychakkar mentioning “that the deep commitment to authenticity, cultural reverence and a contemporary sensibility is what makes the show a must-watch. “

    Will the audience reciprocate as the show builds up in the coming weeks?

  • Zee denies report of cancellation of merger

    Zee denies report of cancellation of merger

    Mumbai: The much-anticipated merger of Zee and Sony has come in a different mode on Tuesday. Zee clarified to the stock listing department about news led by the Economic Times and dismissed all claims of termination of the merger agreement costing Rs 10 billion.

    The company also said the report is baseless and factually incorrect. The news was published in ‘Economic Times’ titled, ‘ The Insider story of what went wrong over two years’. While clarifying these aspects, ‘ We wish to reiterate that the company is committed to the merger with Sony and continuing to work towards a successful closure of the proposed merger.’ Zee said in its released notification.

    Zee also clarifies to abide by commitment for all compliances to SEBI (Security Exchange Board of India) as per Listing Obligations and Disclosure Requirements) Regulations 2015 and will continue to make disclosures in accordance with the same. Zee company secretary Ashish Agrawal shared disclosure clarification.

    After the closing bell shares of Zee Entertainment were down by 8 per cent. ET reported on January 9 regarding potential calling off the deal between Sony and Zee.

  • If not Sony, then who for Zee?

    If not Sony, then who for Zee?

    Mumbai: It’s on. It’s off. It’s on again. It’s off again. The yes and no speculation about the Zee Entertainment merger with Culver Max Entertainment (Sony in India) has been crazy enough to  blow one’s brains in almost every direction.

    Yesterday, Zee-baiters and haters must have gone all gleeful when Bloomberg broke the news that Sony is dis-inclined to go ahead with the fusion courtesy all the brouhaha that has been created around allegations that father Subhash Chandra and son Punit Goenka personally pocketed company-borrowed money. This despite, Punit was loathe to agree to Sony’s demand that he accede his position as CEO of the merged entity to Sony India head NP Singh. Indian media bit the bait of the “failed merger” news and went to town and proclaimed the death of the merged entity. Both Zee and Sony kept their lips zipped officially.  

    Towards evening came a report that a partnership might yet be in discussion splitting the odds equally. The reason: a penalty of $100 million will have to be paid out to Zee TV by Sony should they pull out of the merger, said a few newspaper reports. Others suggested Zee had failed to live up to many conditions precedent in the merger agreement documents between the two and hence a tremendous trust deficit has been built up between the two.  (These reports have since been denied by Zee in a regulatory filing and it has claimed that it is continuing to pursue the merger agreement).

    Sony has to respond to  Zee’s last month’s merger proposal and new conditions by 20-22 January and agree or disagree to the terms; it still has a lot of time to decide. Then why be in a rush to have anonymous sources make the revelation that its interest was off the table? Did the Bloomberg journo misquote the source? Or was Sony just testing how Zee would react to its disgruntlement? Would the latter take advantage of the stringent exit clause and howl or would it just walk away quietly?

    Whatever be Sony’s rationale, it’s imperative that it gets clarity sooner than later. That’s because a megalith is being created with the signing of an agreement between Mukesh Ambani’s Jio (Viacom18) and Disney’s India operations under Disney + Star India. The agglomeration of the two will create a giant which will control a sizeable chunk of the market by viewership. That’s something which many are saying could  harm the development of the media & entertainment vertical in the long term, especially placing oodles of power in the hands of one giant.

    Sectors do better when there is an equally fit No 2 giving the No 1 a run for its dollars. And a No 3 and a No 4. Muscle is needed to fight muscle. Sony, Zee, Sun TV on their own will be dwarfed in front of the Jio-Disney combine. Yes, we have gorillas like Netflix, Amazon, Google, Microsoft operating in India.  But one is not clear about how they will play their hand going forward. A few smaller players will innovate and through their nimble-footedness score a few points. But the advantage of scale of capital, content creation, distribution, and advertising inventory will lie with one major – Jio-Disney.

    We have seen how Jio has changed the dynamics of the telecom as well as streaming business, thanks to its humongous 400 million plus telco subscribers. Making premium sports and entertainment content available for free to subscribers can be a good customer acquisition strategy. But for how long will that go on and that too unchallenged?

    Cable TV operators have been crying foul to the regulator TRAI as the same content on cable TV and DTH is being levied at a fee to subscribers. True, the government wants to make TV available to many more though its free to air service DD FreeDish. For obvious reasons. It wants to be able to address large swathes of the  population across the nation on one platform, rather than have to engage with many more outlets. And it wants it to say what the powers-that-be want to say.

    In such a scenario, it’s imperative that consolidation in the industry is encouraged. So that balance and sanity are maintained.

    Let’s suppose that Sony is willing to let go of a hundred mill in penalties for calling off the merger. Will a corporate raider swoop in jostling out the promoters? Doubtful, considering media is a specialized business which is transforming so rapidly that no non-strategic corporate will be willing to lose billions of dollars in trying to set things right at Zee. Especially considering that its margins have been under pressure and how much cleaning up it needs on several fronts.

    Then, what are the white knight options left for Zee to get scale and get out of its financial commitments to debtors as well as get infusion of cash for growth.

    Private equity? Hedge funds with mountains of resources? They might be cautious, considering how Sony has fled from getting into bed with it.

    Could Adani be interested? He is yet digesting his news venture NDTV and digital acquisitions, so interest from his side might be lukewarm.

    Or could it be Kalanithi Maran’s Sun TV?

    It seems like a good fit. Both Chandra and Maran -run entrepreneurial organisations. Both are pioneers and the latter has so much cash, he does not know what to do with it. Sun TV is strong in the south, Zee TV has strengths in Hindi and some regional languages. Sun TV is nurturing a Hindi language entertainment channel. A joint venture will see lots of benefits accruing to both. The two business groups will have to keep aside the personal and professional differences of the promoters and look at long term survival and growth.

    But that’s in the future. Now, if Goenka and Chandra can find ways to assuage the miffed mood amongst executives in Sony headquarters, the story might have a fairy tale ending like the two want.

    The author is a media analyst. The views expressed in the comment piece are his own and indiantelevision.com need not subscribe to them.

  • Sony likely to call off merger – a low probability event for now

    Sony likely to call off merger – a low probability event for now

    Mumbai: According to media reports, Sony is expected to call of USD 10bn merger with Zee due to a standoff over whether Zee’s CEO Punit Goenka would lead the merged entity.

    Sony plans to file the termination notice before a 20 Jan 2024, extended deadline for closing the deal, saying some of the conditions necessary for the merger had not been met.

    Discussions are still ongoing between the two sides and a resolution can still emerge before the deadline.

    View

    We don’t foresee any negative impact of above so far. As per our checks, deal conversations continue and will most likely go ahead without Goenka as CEO; we expect a final clarity on the extension of the deal by third of week of January’24, which is almost a month ahead of the 20 Dec’2023 agreement cut off date. Conversations continue to happen for both parties, however no final outcome has been reached yet on terms of the deal.

    We continue to believe that the deal is equally important for both entities with competitive intensity growing due to Disney/RIL talks gaining traction.

    Maintain our view the likelihood of the deal going through remains high, Zee had made a statement on 20 Dec, 2023 on entering fair negotiations with Sony, which indicates that they too are very much in favour of the deal going through.

    We will await more updates and any official statement from both parties, in case of change in stance. We don’t foresee Sony agreeing on Mr Punit becoming CEO, due to the ongoing investigation against him. However, there is a very small chance of Goenka putting the deal at risk due to him wanting to become CEO, even if term sheet and deal condition mentions that Zee has moved up 50 per cent over the last one year, despite a muted financial performance , largely on the back of valuation multiple re-rating due to the merger with Sony Corp; any potential risk of the merger getting called off by Sony will have a significant negative impact on valuations.

    Post the change in deal terms/ potential name of a new CEO for the merged Co, shareholder, Board, ROC (Registrar of Companies) and MIB (Ministry of Information and Broadcasting) approval may be needed which may only take a few weeks; our legal experts indicate that a fresh NCLT/CCI approval will not be needed for change in CEO of the merged co; further, as per our assessment – the NCLT/CCI  approval isn’t time bound, which means any potential extension has no negative impact on the merger.

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

  • Zee proposes merger extension with Sony

    Zee proposes merger extension with Sony

    Mumbai: The merger agreement between Zee and Sony dated 21 December 2021, was to be closed by 22 December 2023 (two year period); Zee has proposed extension of the same with Sony.

    Indiantelevison reached out to Sony for their comments. This is what they had to say, “Sony is evaluating the request”.

    According to Zee, in its stock exchange filing, reported that pursuant to the Merger Cooperation Agreement dated 22 December 2021 entered into amongst the Company, Bangla Entertainment Private Ltd (‘BEPL’), and Culver Max Entertainment Private Ltd (formerly known as Sony Pictures Networks India Private Ltd), the company has requested CMEPL and BEPL to extend the date required to make the scheme effective, as per the terms of the Merger Cooperation Agreement.

    The request by Zee to extend the deadline comes just a day after two independent directors were unable to secure the re-appointment of the company’s board.

    Directors Sasha Mirchandani and Vivek Mehra “failed to get the requisite majority of votes,” the company said in an exchange filing.

    Sony Pictures Networks India (SPNI) commented, “ZEE’s notice to the Bombay Stock Exchange and the National Stock Exchange of India dated December 17 is an acknowledgement that they will not be able to meet the December 21, 2023 deadline to close the SPNI/ZEE merger. The notice triggers an existing contractual provision in the deal that allows for both parties to discuss the possibility of extending the deadline. SPNI is required to start those conversations but has not yet agreed to a deadline extension. We look forward to hearing ZEE’s proposals and how they plan to complete the remaining critical closing conditions.”

  • Freemium model in OTT is the future

    Freemium model in OTT is the future

    Mumbai: US subscriber base of Netflix and Disney+ reported growth of 5.4 per cent YoY and 0.2 per cent YoY in Q3CY23, respectively; the international segment outperformed with subscriber growth of 10.5 per cent YoY and 17.0 per cent YoY for Netflix and Disney+, respectively. Netflix continues to lead as it has a paid subscriber base of 247.2mn vs 150.2mn of Disney+. Disney+Hotstar(India and other Asia nations) paid subscribers declined for the fourth consecutive quarter, as it fell 38.7 per cent YoY; Disney+ Hotstar has lost 37 per cent of its paid subscriber base (now at 37.6 mn paid subs) over the four quarters after 1) losing Indian Premier League (IPL) digital rights and 2) offering World Cup content free of cost, which also has led to a loss in paid subscriber base over the past two months. We believe Disney+Hotstar subscriber loss has bottomed and may see mid-single digit growth over the next few quarters based on new content offerings – movies and web series slate. Netflix (US) average revenue per user (ARPU) declined 0.5 per cent YoY whereas Disney+ (US) posted ARPU growth of 23 per cent YoY (on a low base) during the quarter. In India, Disney+Hotstar was the only platform that grew 20.7 per cent YoY to USD 0.7 or Rs 58 per month on low base.

    Focus on cost optimisation driving increased monetisation

    Netflix’s innovative move on paid sharing has reaped rich dividends, as it has led to better subscriber growth, which was 9.4 per cent YoY (average) over the past two quarters since the introduction of this feature in May’23 ; the ad tier model too has received a positive response and can become big, led by connected TV adoption globally, as Netflix also plans to make inroads in the gaming business too. Disney+ has also seen success in the ad supported plan, as 50 per cent of new subscriber addition is on ad-supported model. Disney+ plans to reduce losses in the streaming business and has cut annual content budget by 7 per cent YoY to USD 25bn. Disney continues to evaluate strategic options for its linear TV networks while maintaining focus on cost optimisation and high-quality content delivery.

    Read through for Indian OTT

    Zee5, India’s larger broadcaster peer, too has focused on efficiency in its digital business, as losses narrowed marginally by 8.3 per cent YoY to Rs 2.5bn. India’s OTT market has seen a big disruption post Jio Cinema’s free offering of IPL content, which, in turn, will negatively affect subscription video on-demand (SVOD) revenue growth, as platforms may be unable to raise prices; innovative measures, such as ad-supported streaming and password-sharing initiatives may be the only levers for better monetization. Disney+Hotstar continues to look for a strategic partner, and high probability of the Z-Sony merger, we still believe India’s OTT market will see early signs of consolidation in the near to medium term, which is the only way content cost would climb down and enable platforms to move closer to break-even & profitability.

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

  • Ad environment muted; growth led by subscribers

    Ad environment muted; growth led by subscribers

    Mumbai: Zee Entertainment (Z IN) posted ad. revenue drop of 3.5 per cent YoY in H1, as demand environment was volatile despite recovery in ad spend. We estimate H2FY24E to report ad spend growth of mere 5-6 per cent YoY, as large portion of spends could be diverted to sports due to the Cricket World Cup (CWC). Subscription revenue was strong due to NTO 3.0, which led to price hikes after three years. Expect growth to be in the range of 7-8 per cent YoY in H2FY24E as well. Overall revenue grew a sharp 20.2 per cent YoY, largely led by performance of Gadar 2, excluding which overall revenue grew mere 5.4 per cent YoY. Zee5 also reported a revenue growth of 59 per cent YoY to Rs 2,652mn, helped by a syndication deal. Z gained viewership share in linear TV too, as its share grew 90bps QoQ to 17.9 per cent, helped by gain in selective regional genres.

    Probability of merger going through high

    Z’s share price performance will largely be led by valuation re-rating, hinged on the merger with Sony. The recent order passed by SAT allows Punit Goenka to remain the CEO of the merged entity, but the SEBI may continue to investigate Punit Goenka. As per our assessment (https://tinyurl.com/2wu5bxc7), the probability of the merger going through is high, with or without Punit Goenka, unless he does not change his stance (maintaining his view that he will give utmost importance to the merger going through for shareholder interest, even if he has to let go of his designation as CEO of the merged entity). Per our legal checks, there is a low likelihood of Sony wanting Goenka to remain as CEO, until the investigation outcome is known; further, the investigation outcome may take 12-15 months and Sony may not wait that long for the merger to be executed. This potentially increases the risk for Z/Sony merger, which may lead to valuations being under check.

    Valuation: Reiterate Buy; TP unchanged at Rs 340

    We reiterate buy with SoTP-TP of Rs 340 (unchanged) after factoring in merger synergies and potential medium-term play backed by the strength of Z and Sony in the TV and OTT businesses. We assume a cash infusion of $1.5bn by Sony and value the merged company broadcasting business at 20x (unchanged) one-year forward P/E and the OTT business at 4.0x one-year forward EV/sales. Our PAT estimate incorporates potential OTT losses.

    The credit for this article goes to Elara Capital Sr VP – research analyst (media, consumer discretionary & internet) Karan Taurani.

  • SAT allowing Punit as CEO of Zee/Sony merged co. – a potential overhang if Sony does not agree on the same

    SAT allowing Punit as CEO of Zee/Sony merged co. – a potential overhang if Sony does not agree on the same

    Mumbai: As per media reports (link – https://tinyurl.com/4sfbhbn4

    ), Sony does not want Punit Goenka to head Zee/Sony merged co, amidst the ongoing SEBI investigation which will continue despite interim relief from SAT. We believe this is as per our two scenarios pointed out earlier (scenario 1 – merger process expedited with clarity over Punit and scenario 2 – Sony not in favour of appointing Punit as CEO amidst the ongoing investigation), which clearly mentioned that Sony may not be in favour of having a CEO who is undergoing an investigation.

    Legally, we don’t foresee any challenge in appointing Punit as CEO, post the relief by SAT- as indicated by primary checks with legal experts too. However, as Sony is the majority in this merger – they may decide to appoint someone else due to this investigation; there is a high likelihood of Sony appointing someone internally to head the merged co.

    There is minimal impact of the above move (change in CEO) eventually, as the appointment of a new CEO will require a mere shareholder and Board approval; as mentioned earlier, we don’t foresee big delays beyond a point for the merger and the process could end over next 8-12 weeks, as Sony may not wait longer than that. Hence, we don’t even expect a big delay as such on the merger due to this move. Expect a larger transition time in business synergies case of Sony acquiring Zee without Punit, due to a potential new management for Zee

    Albeit above, 1) the business synergies, 2) superior CG (corporate governance) practice, 3) scale in OTT remain to be the drivers for the merged co and this could drive superior valuation multiples.

    Various scenarios that could emerge basis above – if Punit Geonka changes his stance and wants to remain CEO of the merged co, post SAT approval or keeps his stance (not wanting to become CEO)

    1) Scenario one – Sony may back out – merged called off  (Probability -20 per cent)

    In case of Punit Goenka wanting to be the CEO of the merged co. and Sony not agreeing upon the same,  it may lead to Sony backing out of the merger. We believe the probability of this event seems to very low, as the merger is very important for Z shareholders and the Goenka family; also, Sony may struggle to scale up in a market like India in case Disney is acquired by Reliance. We believe Sony too is equally eager for the merger as Z is, as the linear TV and OTT market has turned disruptive.

    2) Scenario two – Punit remains CEO of the merged co (Probability -10 per cent)

    In this scenario, Sony may allow Punit Goenka to remain as CEO and have their own finance, operations team for day to day affairs, with a majority on Board by Sony. However, given Sony’s MNC culture, this may seem to be a low likelihood event, unless they legally need to do it (As per term sheet of the merger) and cannot back out of the merger; Sony may not want to have a CEO on Board, who is under a SEBI investigation

    3) Scenario three – Punit may be offered a board seat, but not a CEO role (Probability -30 per cent)

    In this scenario, Punit may be offered a Board seat in the merged co, but not a CEO designation, until the outcome of investigation is known. This in turn may lead to superior CG practices in Z, with change in finance and operations team post the merger by Sony. This could potentially be a win-win for both parties, if mutually agreed upon. Further, Punit may also ask Sony for a higher non-compete fee in case he plans to step aside of Zee and not become CEO. We believe the probability of this event is on the higher side, as Punit may eventually agree to be on Board in the interim, until the outcome of investigation is known with a higher non compete fee

    4) Scenario four – Merger goes ahead without Punit (Probability – 40 per cent)

    In this scenario, Punit Goenka agrees to step aside as CEO if Sony decides to call off the merger; Sony may continue to run its India operations in India if the merger is called off, but Zee may struggle as valuations may come off atleast 50 per cent if the merger does not go through, which in turn could hamper shareholder and promoter stake valuation in Z today. We thus believe that at the end of the day, bargaining power is limited from Z promoter side, and they may have to agree upon the same. Sony can also seek shareholder approval (consortium) and go ahead with the merger without Punit Goenka. We believe probability of this event is the highest as shareholders own the company, with promoters having a mere 4 per cent stake.

    In terms of merger process, Z has already filed with ROC (Registrar of Companies); the merger process has reached advance stages and hence it may be tough for Sony too to back out of this merger. We thus believe that the likelihood of this merger going through remains high (80 per cent probability) with or without Punit Geonka; however, the recent approval by SAT allowing Punit as CEO and Sony not agreeing upon the same is a potential risk for the merger, as probability of the merger not going through moves up to 20 per cent now. As per our checks with legal experts, SEBI will file a stay in Supreme Court against the SAT order by end of this month. We await updates from Sony and Zee management, which will provide us more colour on where this merger could be headed.

    The credit for this article goes to Elara Capital Sr VP – research analyst (media, consumer discretionary & internet) Karan Taurani.

  • Post SAT order impact – Media & entertainment – Win-win for Z-Sony

    Post SAT order impact – Media & entertainment – Win-win for Z-Sony

    Mumbai: The Securities Appellate Tribunal (SAT) passed an order on 30 October 2023 allowing Mr. Punit Goenka to become CEO and MD of the merged company, Zee Entertainment-Sony (Z-Sony). Based on our assessment of the detailed order (Zee SAT order) and channel checks with legal experts, we believe the SAT order is a positive for Goenka, as it states he can continue as MD and CEO, as there no strong evidence yet to support the allegations of money siphoning against him; further, his counsel has provided adequate evidence and documents to substantiate it.

    Post this order, there is a high likelihood the Securities and Exchange Board of India (SEBI) will appeal against the order in the Supreme Court to get a stay; however, Z-Sony merged co. can be formed with Goenka as its head in the interim. The SAT order also states the investigation in this case will continue; as per our assessment, the outcome could take 12-18 months; Goenka could obtain necessary legal recourse in case the outcome is against him in the medium term; if it is favourable, he will continue as usual.

    This underscores our view that there is no likelihood of Sony backing out from the merger, and Goenka getting relief could lead to expedited timelines for the merged entity to be formed with him at the helm, as it may not require changes in the term sheet or any shareholder and Board approval. Further, appeals made by Axis Finance and IDBI Bank will have no impact on the merger, and the NCLT approval is without any conditions. We believe the merged entity record date could be announced in the last week of November or in the first week of December, which means the merged firm could be listed in January 2024 (post six weeks of delisting). We maintain BUY with a Sep’24 TP of Rs 340.

    SAT order removes overhang on merger: Goenka to be reinstated as CEO of merged entity

    The SAT order is a significant victory for Goenka. Nevertheless, it is expected that SEBI will persist with its investigation, as the allegations against Zee Entertainment appear to hold merit. However, Sony will have to appoint Goenka as CEO of the merged company; further, this will not lead to change in the merged entity board and merger timelines. It is highly likely that SEBI will file a statutory appeal against the SAT order in the Supreme Court in the next 60 days. If this were to take place, the earliest date for a hearing would be scheduled for the first week of January 2024. Therefore, we believe there is no likelihood of Sony backing out of the merger as there are no legal constraints preventing it from proceeding. Further, the cases before the National Company Law Appellate Tribunal (NCLAT) against Zee will continue and will have no impact on the merger.

    SEBI to continue with the investigation without a timeframe

    As per the order, SAT has acknowledged the allegations of fund diversion have yet to be proven, and both Zee Entertainment (Z IN) and Goenka have presented satisfactory explanations supported by documentation, effectively fulfilling the burden of proof. Additionally, SAT also says it has noted factual inaccuracies in the order issued by whole-time members regarding specific companies that were classified as Essel Group companies when in fact they were not, but at this moment it is not fair to punish Goenka because the merger of Zee-Sony has been allowed. Nevertheless, SAT has granted SEBI the authority to proceed with its inquiry into the alleged fund diversion of Rs 42.1bn by Subhash Chandra and Goenka, without establishing a specific timeframe for the investigation. Z and Goenka have been instructed to cooperate with the investigation.

    Merged entity likely to be listed between December 2023 and March 2024

    We expect the merged entity to get listed anytime between December 2023 and March 2024.  This will depend on how Sony wants to take it forward. The RoC (Registrar of Companies) filing has been done and processes required for the merger could end in the next four weeks. The investigation timeline could vary between 12 and 18 months post the merged entity is formed. In case allegations are not proven, things will continue as usual. However, in case allegations are proven, Goenka may have to step down or find legal recourse. Post the merged entity is formed with Goenka as CEO, our checks with legal experts indicate that Sony may also support Goenka in legal proceedings against SEBI, which also provides comfort.

    We retain our positive stance on Z-Sony merged company

    In the newly configured merged entity Board, five out of nine directors would represent Sony, with the Chairman also hailing from Sony. This shift in Board composition is anticipated to lead to an enhancement in corporate governance at Z along with a change in management dynamic favouring Sony. We retain our positive stance, led by:

    1) synergistic benefits

    2) MNC control (superior corporate governance practices)

    3) positive impact of consolidation in the TV industry

    4) Scaling up of the OTT business.

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

  • 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