Zee promoter Subhash Chandra wrote to FM before Sony merger termination: CNBC-TV18 accesses letter

Zee Entertainment's promoter Subhash Chandra wrote to Finance Minister Nirmala Sitharaman last week on January 16, a week before its $10 billion merger with Sony Pictures was terminated. The letter, accessed by CNBC-TV18 sought the Finance Minister's intervention to "safeguard the interest of Zee Entertainment's minority shareholders."

The letter alleges that efforts are ongoing to scuttle the merger with Sony. Chandra wrote in his letter that he is not concerned about the probe by market regulator SEBI but with the timing of the new notice.

"I am not suggesting that SEBI should not investigate if they have doubts of any kind," the letter stated, adding that the new notice does not contain any point which is not already part of the company's records, which have already been provided to SEBI.

"That said, if the mentioned parties continue to influence the investigation, especially by SEBI, it will lead to a huge financial loss for minority shareholders of ZEE," Chandra wrote in his letter.

Zee Entertainment's shares fell 30% on Tuesday, marking its biggest single-day fall on record, leading to a market capitalisation erosion of over ₹7,000 crore. The fall came after Sony Pictures terminated the merger on Monday, which was in the works for over two years. It has also sought $90 million from Zee as termination fees.

The termination of the merger also prompted multiple downgrades from analysts, who cut their price targets on Zee's stock by as much as 50%.

"SEBI has been acting with a predetermined mind, which is evident in the order passed by the appellant court, Justice Tarun Agarwalla, on October 30, 2023," the letter read.

The Securities Appellate Tribunal (SAT) had overturned SEBI's order which had barred both Subhash Chandra and Punit Goenka from holding any key managerial positions in Zee Entertainment, till investigations were completed.

Post the overturning of the order, Punit Goenka was reinstated as Zee's MD & CEO.

The letter alleged that the notice being issued at this stage appears to be an "exercise to sensationalise the matter through media platforms." Chandra also highlights that he expressed similar concerns in a letter written to the market regulator in November 2018, over "negative forces impacting the valuation of Zee."

Chandra's letter further states that he has made efforts with all the lenders and repaid nearly 92% of his debt to the tune of ₹40,000 crore.

As a result of the multiple stake sales undertaken by Zee's promoters, their stake in the company is down to 4% from around 40% earlier.

On Tuesday, sources told CNBC-TV18 that the market regulator is in the final stages of its investigation against Punit Goenka and Subhash Chandra and their role at Zee.

SEBI has been investigating charges around fund siphoning and window dressing of books of accounts which allegedly benefited the promoter family of Zee Entertainment.

As per sources, in the first phase of its investigation, SEBI found misuse of funds to the tune of ₹200 crore from Zee Entertainment, benefiting the promoter family. However, now, according to sources, the size of the violation has escalated to around ₹800-1,000 crore.

Zee Entertainment's shares will be in focus today as well as the stock has exited the F&O ban, which means that new positions can be created in the stock.