Zee Entertainment shares plunge 6% after SEBI order on Subhash Chandra, Punit Goenka

Shares of Zee Entertainment Enterprises (ZEEL) tumbled over 6% in opening trade on Tuesday after market regulator Securities and Exchange Board of India (SEBI) banned the company’s former chairman Subhash Chandra and his son and MD & CEO Punit Goenka from holding the position of a director or key managerial personnel in any listed company or its subsidiaries.

“We wish to inform you that the Securities and Exchange Board of India has issued an interim ex-parte order against Subhash Chandra and Punit Goenka, Managing Director & CEO of the Company,” ZEEL said in a BSE filing today.

The case pertains to SEBI's probe after the resignation of two independent directors (Sunil Kumar and Neharika Vohra) of ZEEL in November 2019 after raising concerns over several issues, including appropriation of certain fixed deposit (FD) of ZEEL by YES Bank for squaring off loans of related entities of Essel Group.

Reacting to the news, ZEEL shares opened 5% lower at ₹184.95 against the previous closing price of ₹194.85 on the BSE. In the early trade, the share price of media and entertainment company declined as much as 6.3% to ₹182.60, while the market capitalisation slipped to ₹18,081 crore.

At the current price level, the stock trades 36% lower than its 52-week high of ₹286.90 touched on October 6, 2022, while it is up nearly 4% from its 52-week low of ₹175.80 hit on May 26, 2023. The stock has fallen nearly 18% in a year; 28% in six-month; and around 2% in a month. In the last one week, the counter has lost 6%.

The stock was hammered after the SEBI’s probe revealed that Chandra, the then chairman of ZEEL, provided a ‘letter of comfort’ on September 4, 2018, towards credit facilities availed by certain group companies from YES Bank. Neharika Vohra's resignation letter to then ZEEL chairman showed this LoC was known only to a few persons in management and even the board of ZEEL was not aware of the same, SEBI said.

On the strength of the LoC, Yes Bank adjusted a fixed deposit of ₹200 crore of ZEEL for meeting the obligations of seven entities, including Pan India Infraprojects, Essel Green Mobility, Essel Corporate Resources, Essel Utilities Distribution Company, Essel Business Excellence Services, Pan India Network Infravest, and Living Entertainment Enterprises.

These associate entities were owned or controlled by family members of Chandra and Goenka, the promoter family that is also the beneficial owner of promoters of ZEEL, founds SEBI.

SEBI said Chandra and Goenka were the "direct beneficiaries" of the alleged fund diversion, since the associate entities that benefitted from "liquidation of FD of ZEEL by YES Bank were owned or controlled by the promoter family", the order said, adding that both abused their position by siphoning off funds for their own benefit.

Earlier in February this year, the National Company Law Appellate Tribunal (NCLAT) had stayed the insolvency proceedings initiated by the National Company Law Tribunal (NCLT) against the media company. In an order dated February 22, 2023, the bankruptcy court had admitted the insolvency proceedings against ZEEL after it failed to fulfill its debt obligations to IndusInd Bank regarding payment of more than ₹83 crore loan issued to Siti Networks. The court had also admitted IndusInd’s insolvency plea against Siti Networks and appointed an interim resolution professional.

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