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- Culver Max Entertainment, terminated the two-year deal with
Zee Entertainment on Monday. Sony is also seeking a $90 million termination fee from Zee, while the latter is refuting it and evaluating legal options.- Analysts downgraded the Zee stock as merger possibility was driving it for the last two years.
The stock of
The stock hit the lower circuit in the morning trade. It was trading at ₹162 which is at 52-week lows. The bourses revised lower circuit limit for the company on Tuesday.
Sony is also seeking a $90 million termination fee, which has led analysts to quickly downgrade the stock. “Merger with Sony was the key valuation driver to move up in the past two years. But given the termination, we downgrade Zee to ‘sell’,” says a report by Elara Capital.
With the merger prospects gone, ZEEL valuation will slump back to its 2021 days, and brings back a lot of its earlier troubles to the fore. One of its crises as of 2019 was its promoter pledging crisis. After which, Zee promoters repaid loans with multiple stake sales that brought down its promoter shareholding from 42% to a mere 4%.
Its earnings performance too has been dismal over the last two years. “Since the announcement of the merger, Zee’s profitability has eroded due to weak industry dynamics. For instance, on an absolute basis, Zee’s PAT slid around 48% over FY21–23,” said a report by CLSA.
Zee, like most of its peers, might also face heavy competition from yet another mega media deal that’s in progress as per media reports. The Disney Hotstar merger with Reliance’s Viacom will threaten most players in the industry.
“Meanwhile, Reliance’s Viacom and Disney+Hotstar deal shall get wrapped up soon. Both the entities together hold major cricket broadcasting rights such as IPL, ICC and other Indian bilateral cricket series. In our view, for Zee to be a serious player in sports and to scale up its OTT, it would need a financial partner,” said
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