SEBI investigation Zee Entertainment: The Securities and Exchange Board of India (SEBI) has uncovered a significant accounting discrepancy totaling over $240 million in the accounts of Zee Entertainment Enterprises Ltd., Bloomberg reported, quoting sources familiar with the matter. This revealation adds to the challenges faced by the embattled media conglomerate, occurring shortly after the collapse of its merger with Sony Group Corp’s local unit.

SEBI's investigation into Zee Entertainment's founders, Subhash Chandra and Puneet Goenka, revealed that approximately Rs 2,000 crore may have been diverted from the company to other entities linked to the Zee Group. This amount is substantially higher than the initial estimate by SEBI investigators, underscoring the severity of the irregularities uncovered.

While the exact amount is subject to revision pending SEBI's review of responses from company executives, the regulator has intensified its scrutiny of Zee's leadership. Senior officials, including founders Subhash Chandra and Puneet Goenka, along with certain board members, have been summoned by SEBI to provide explanations regarding the allegations.

In response to inquiries, a SEBI representative refrained from immediate comment, while a spokesperson for Zee Entertainment declined to address the specifics of the fund diversion, noting only that the company has been cooperating with SEBI's requests for information in the ongoing investigation.

For Puneet Goenka, Zee Entertainment's CEO, these latest developments compound the challenges he faces in restoring investor confidence following the collapse of the $10 billion merger with Sony. The termination of the merger in January came after prolonged disputes over leadership appointments within the combined entity.

Despite the setback, reports suggest that Zee is exploring the possibility of rekindling discussions with Sony to revive the merger. However, significant differences persist between the two entities, casting uncertainty over the feasibility of resurrecting the deal.

The regulatory probe into alleged financial improprieties involving Zee's founders has been a source of contention between Sony and Zee since mid-2023. This conflict culminated in Sony's decision to scuttle the merger deal in January, citing unresolved leadership disputes.

SEBI's intervention in August led to the barring of Zee founders from holding executive positions in any listed firm, citing abuses of power and fund diversion for personal gain. However, a partial reprieve granted in October allowed Puneet Goenka to retain an executive position while the investigation continues.

The failed merger represents a missed opportunity for both parties, as it would have bolstered Sony's content offerings with access to Zee's extensive library of regional Indian content while potentially improving Zee Entertainment's financial outlook. Despite reporting a profit of Rs 58.54 crore for the quarter ended December 31, Zee's full-year profits had plummeted by 95 per cent, highlighting the challenges facing the company amidst ongoing regulatory scrutiny and internal upheaval.

The shares of Zee Entertainment opened 10 per cent lower at Rs 173.40 apiece on the NSE on Wednesday, February 21, 2024.