NCLT dismisses insolvency plea by IDBI Bank against ZEE Ent; stock surges

In a major development, the National Company Law Tribunal (NCLT) on Friday dismissed the insolvency plea by IDBI Bank against Subhash Chandra-led ZEE Entertainment Enterprises Ltd, part of the Essel Group. With this, decks are cleared for the proposed merger between ZEE Entertainment and Sony Pictures Networks India Private Limited (SPNI), a subsidiary of Japan's Sony Pictures.  

Shares of ZEE Entertainment surged as much as 2.2% to hit an intraday high of ₹189.50 apiece on the BSE. The scrip opened higher at ₹186.50 against the closing price of the previous session at ₹185.25. At 1:26 pm, the company's shares were trading higher by 0.40% at ₹186. During the session, the company’s market capitalisation stood at ₹17,856 crore with 4,79,543 shares exchanging hands on the BSE against the two-week average of 3.68 lakh shares.

In contrast to this, after gaining momentum in early trade, the shares of IDBI Bank declined as much as 2.8% to hit an intraday low of ₹54.42 on the BSE. The scrip opened a tad higher at ₹56.02 against the closing price of the previous closing session at ₹56.01.

The development comes months after IDBI Bank approached Mumbai bench of the bankruptcy court in December last year, claiming to be the financial creditor of ZEE Entertainment and seeking an insolvency proceeding against the debt-laden media giant, in order to recover ₹149.60 crore dues. The bank had then said the bank’s purported claim arises under a Debt Service Reserve Agreement entered into by the bank and ZEE Entertainment for the financial facility availed by SITI Networks (formerly known as SITI Cable Network), which is part of the Essel Group. The bank also said ZEE Entertainment "vehemently disputed" the claims made by the bank in other proceedings concerning the recovery of alleged dues.

In March this year, the Essel Group-owned media conglomerate entered into settlement agreements with IndusInd Bank and Indian Performing Right Society (IPRS) in two separate cases pertaining to payment disputes. Both entities have withdrawn their insolvency pleas against the debt-laden media company in the bankruptcy court. As part of the settlement agreement, IndusInd Bank would withdraw its objection to ZEE's merger with a local unit of Japan's Sony. The case pertains to the alleged default of ₹83.08 crore term loan facility issued to Siti Network.

Meanwhile, the terms of the settlement with IPRS have not been disclosed by ZEE Entertainment. In January, IPRS, which protects the interests of music artists, filed a plea at the NCLT to initiate a corporate insolvency resolution process against Zee Entertainment, claiming a default of ₹211.41 crore in music royalty payments.  The artistes’ body filed the application as an operational creditor claiming dues towards royalty payable for utilisation of "literary and musical works.

On February 24, 2023, the NCLT had stayed the insolvency proceedings against Zee in the appeal filed by Punit Goenka, MD and CEO of ZEEL

In December 2021, ZEE Entertainment and SPNI  signed definitive agreements to merge the two entities. The amalgamation will combine the linear networks, digital assets, production operations and program libraries under the two media giants, creating the second-largest entertainment network in the country. The combined entity will include 75 TV channels, two film studios – Zee Studios and Sony Pictures Films India, as well as two video streaming services – ZEE5 and Sony LIV, and digital content studio Studio NXT, which is currently under Sony Pictures Network.