Zee shares crack 13% today; Emkay says 'significant downside' ahead if Sony calls off merger

Shares of Zee Entertainment Enterprises Ltd fell sharply in Tuesday's trade amid reports that Japan's Sony may scrap the $10 billion merger of its India unit with the broadcaster. The stock dived 12.67 per cent to hit a day low of Rs 242.30 against its previous close of Rs 277.45.

Brokerage Emkay Global said Zee shares could see a significant downside in case the proposed ZEE-Sony merger is called off. "After receiving all necessary regulatory approvals, this breakdown can be a setback to both Sony and ZEE, having both reported subpar growth over the last year. We believe the merger not going through will be a lose-lose for both parties, particularly in the face of competition with a much larger entity of Reliance-Disney (if the merger goes through)," Emkay stated.

The domestic brokerage said both Zee and Sony will potentially have to recalibrate their strategies from ground zero, which would be a tall order. A clarity should emerge in the next couple of weeks regarding a final decision concerning the merger.

Both Zee and Sony are yet to issue their official statements on the issue.

The proposed deal to merge Zee and Sony's TV channels, streaming platforms and film assets has been delayed after India's markets regulator (Sebi), in August last year, barred Punit Goenka, Zee CEO and a candidate to lead the merged entity, from directorships of any listed company.

A tribunal, however, lifted the ban on Goenka in October but said he would have to cooperate with any investigation by the country's markets regulator.

On BSE, around 34.14 lakh shares were seen changing hands today. The figure was way more than the two-week average volume of 5.71 lakh shares. Turnover on the counter came at Rs 85.88 crore, commanding a market capitalisation of Rs 24,061.01 crore.

There were 16,04,024 sell orders against buy orders of 2,27,098 shares.

The counter's 14-day relative strength index (RSI) came at 38.83. A level below 30 is defined as oversold while a value above 70 is considered overbought.

The company's stock has a negative price-to-equity (P/E) ratio of 221.23 against a price-to-book (P/B) value of 2.71.

As of September 2023, promoters held 3.99 per cent stake in the media firm.

(Disclaimer: Business Today provides stock market news for informational purposes only and that should not be construed as investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.)

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