“We would like to clarify that the Company has not been involved in any negotiations or any other event,” said Zee Entertainment in a stock exchange filing.

The anticipation of a potential patch-up contributed to the positive movement in ZEEL stock during the trading session. ZEEL shares surged 8 per cent, closing at ₹193 on the BSE and ₹190.40 on the NSE.

Sony Group Corp. had last month terminated the merger of its India unit with Zee.

The merger, initially announced over two years ago, encountered a deadlock over the leadership of the combined company. Zee suggested its chief executive Punit Goenka to lead, but Sony disagreed, citing an ongoing market regulator probe into Goenka’s financial conduct.

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What is the SEBI case against Punit Goenka?

In June last year, the Securities and Exchange Board of India (SEBI) accused the Mumbai-based media conglomerate of orchestrating deceptive loan recoveries to mask private financing deals involving founder Subhash Chandra. SEBI’s interim order contended that Chandra and his son, Goenka, abused their positions by diverting funds. It barred the duo from holding the position of a director or key managerial position in any listed company for allegedly siphoning off funds of the media firm.

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SEBI alleged that the duo engaged in misleading practices, creating false entries to deceive investors and regulators about the purported return of money by associate entities. Instead, ZEEL’s funds were purportedly circulated through multiple layers, ultimately ending up in the media company’s account.

The market regulator further said that Chandra and Goenka ‘alienated’ the assets of ZEEL and other listed companies within the media conglomerate for the benefit of associate entities owned and controlled by them.

According to the SEBI order, the fund siphoning appeared to be a well-planned scheme, involving the use of up to 13 entities as pass-through entities within a brief period of two days in some instances.

SEBI highlighted a significant decline in ZEEL’s share price, dropping from a high of nearly ₹600 per share to the current value of less than ₹200 per share during the financial years 2018-19 to 2022-23. The regulator noted that despite the company’s consistent profitability and positive after-tax profits, this erosion of wealth suggests underlying issues within the company. The promoter shareholding also plummeted from 41.62 per cent to 3.99 per cent.

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Punit Goenka got relief against the SEBI order

The Securities Appellate Tribunal in October set aside the SEBI order of an eight-month management restriction on Goenka. The SEBI can, however, proceed with its investigation of the allegations and Goenka has been asked to cooperate, the tribunal had ruled.

Despite Goenka receiving relief from an appellate authority against the SEBI order, allowing him to hold executive roles, Sony continued to view the ongoing probe as a significant corporate governance concern.