Shares in India’s Zee Entertainment plunged by as much as 30% on Tuesday, set for their worst day ever, after the collapse of its 800 crore merger with Sony’s local unit fanned concern that it will fail to thrive.The breakdown in two-year talks also comes as competition is heating up with Disney and billionaire Mukesh Ambani's Reliance in talks to merge their Indian media assets, and at a time when Zee has seen declines in profit, advertising revenue and cash reserves. Vivekanand Subbaraman, an analyst at brokerage Ambit Capital, said Zee's troubles with scaling up its business could see it lose its No.2 position in the Indian broadcast market.The challenge that Zee is facing is that the TV business has been declining at a fairly fast pace - its fiscal 2023 ad revenue is still 22% below 2019 levels."Zee's net profit slid 68% in the first six months of the current financial year, as advertising revenue slipped 3.5% and expenses jumped nearly 20%. Its cash reserves dropped 40%.The stock was last trading down 29% at 164.45 rupees, a loss of more than $800 million in market value and is now down 36% since the merger was announced in September 2021.
Meanwhile, in a bigger blow for shareholders of Zee Entertainment Enterprises Ltd, a report said on Tuesday that Sebi's probe reveals Rs 800-Rs 1,000 crore may have been siphoned as against the earlier reported figure of Rs 200 crore. CNBC TV18 reported that the alleged amount siphoned being investigated by market regulator Securities and Exchange Board of India (Sebi) has risen substantially.The report couldn't have come at a worse time for Zee shareholders as the stock already got battered 30% on Tuesday in the wake of Japan's Sony terminating the $10-billion merger deal with Zee on Monday. At 1400 hours on Tuesday, Zee's scrip was trading 29% lower at Rs 164.25.Sony is also seeking $90 million as break-up fees for violating the terms of the merger pact and “invoking arbitration”, which ZEEL said it will contest legally.