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Mystery thickens in Zee fund diversion case amid reports of accounting hole

By Khushboo Tiwari
February 29, 2024 13:55 IST
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The mystery surrounding the alleged fund diversion from Zee Entertainment Enterprises (Zee) by founders Subhash Chandra and Punit Goenka has thickened with speculations of an amount multiple times higher than that cited by the ex-parte interim order passed by the Securities and Exchange Board of India (Sebi) dated June 12, 2023.


Illustration: Dominic Xavier/

While Zee shares witnessed a fresh selloff on Wednesday, news reports of accounting fraud left investors guessing about the hole in the media broadcaster’s books.

An order by the Securities Appellate Tribunal (SAT) in October 2023 had clearly hinted that Sebi’s investigation had found a deeper rout.


The order quotes a submission made by the Sebi counsel, “…there are a large number of transactions running into Rs 2,000 crore involving companies owned, controlled, or otherwise related to promoters.”

The counsel had further argued to the tribunal that additional letters of comfort (LoCs) issued by Goenka and his father had come into existence, including one to the tune of Rs 4,210 crore issued by Chandra in his capacity as chairman of Essel Group.

Shares of Zee tanked 14 per cent even as the media broadcaster termed the “rumours pertaining to accounting issues in the company are incorrect, baseless, and false”.

Shares of Zee closed at Rs 164.5, recording an erosion of Rs 2,700 crore in market capitalisation.

The stock is now down 40 per cent this year and has lost Rs 10,580 crore in market value.

Sebi’s interim order was triggered by an LoC of Rs 200 crore for appropriating a fixed deposit with YES Bank.

Sources said that Sebi has now investigated several other LoCs issued by the father-son duo.

Sources said Sebi is currently investigating the Zee matter and is expected to pass a final order by mid-April.

News reports in Bloomberg and Reuters citing sources said during its investigation Sebi has found fund diversion at Zee at around Rs 2,000 crore.

The reports dashed the hopes of investors who had lapped up Zee’s shares in an earlier session on reports that Zee and Sony were making a last-ditch effort to salvage the $10 billion merger.

“In this regard, the company is not aware of any order wherein Sebi has recorded any finding and therefore it has been falsely reported,” said Zee in the exchange filing.

Sebi had issued an ex-parte interim order in June 2023.

In a confirmatory order issued in August 2023, the regulator had said that it would take up to eight months to finish the probe.

In the confirmatory order, Sebi noted that an internal examination of related party transactions carried out by Grant Thornton India had a minimum value of Rs 23 crore, which left out the majority of the transactions.

These transactions are under examination.

In October last year, SAT gave relief to Zee chief Goenka from the Sebi order barring him from holding key positions in four group firms.

“The company has been in the process of providing all the comments, information, or explanation requested by Sebi and has extended complete cooperation on all aspects,” Zee further said in its filing.

The Zee executive was given a personal hearing before the market regulator before the directions in the confirmatory order were firmed up.

The promoters of Zee have less than a 4 per cent stake in the company while 96 per cent of it is publicly owned.

According to the allegations, funds diverted from Zee and associate entities benefited the promoter family.

The planned merger with Sony’s India unit was also shrouded with uncertainty following Sebi’s action against the founders.

There were also differences between the two media behemoths on whether Goenka should be at the helm of the operations of the merged entity.

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Khushboo Tiwari
Source: source

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