It was a bad day on the NSE on Friday for Zee entertainment as the media giant breaking its two winning run, cracked 30.92% to ₹229.70. This incident lodged its worst fail ever. Dish tv, a subsidiary of Zee entertainment also tanked 37.41% to ₹21. Here’s a report on why this breakdown may have happened.
A report in the Wire stated that a link has floated out of thin air between Essel group and another company which is already under the scanner for suspected demonetization deposits.
The report in the Wire stated that “Dreamline Manpower Solutions, a company being probed by the SFIO, carried out transactions involving a few Essel entities in 2016-17 and is also at the heart of a legal spat between Videocon and Essel,” Though later it has been clarified by the media conglomerate Zee Entertainment that the company is “unaware of the news item and factual correctness of the news report on Essel Group.”
Some reports also seem to suggest that the plan to sell a stake of Zee Entertainment’s promoters’ in the company has gained fresh thrust.
An Economic Times report also suggested that the stakeholders of Zee Entertainment have zeroed in on three companies to sell in the entity half of their holdings. These three companies being Sony Pictures, which owns competing broadcast business Sony Pictures Networks India, a US-based media conglomerate, and a Chinese company.
The report further stated, quoting a company spokesperson that the ZEE’s discussions relating to the stake sale with the future associates are on and the progress is very positive.
ZEE reported 50.26 percent year-on-year rise in consolidated profit at Rs 562.38 crore for the third quarter against Rs 374.26 crore in the same period last year which was by the way exceeding the market expectations.
However, some experts seem to suggest that there are headwinds affecting the company in short term which will keep the downside risk high.
Sameer Kalra, founder and equity research analyst of Target Investing regarding the concerned matter stated that "Regulatory changes in broadcasting, as the customer gets to choose what to watch, will impact the viewership and subscription revenue in short to medium term and will eventually impact the valuations as advertising revenue is directly related to viewership,"
He also added, "Promoter stake sale of 25 percent and above is another downside risk as it is a family influenced management, which reduced the incentive for minority investor”.