Independent directors Neharika Vohra and Subodh Kumar had quit the Zee board last year, citing multiple issues | Photo: Company
The Zee Entertainment
stock has shed close to 15 per cent from its highs over the last two trading sessions.
The sharp correction followed reports that the Ministry of Corporate Affairs
(MCA) had ordered an inspection of the firm’s books on allegations of corporate governance lapses and also because of the resignations of some of its independent directors.
In a clarification to the exchanges, Zee acknowledged that it had received a letter from the MCA, seeking information and inspection. The company, however, clarified that the same was available in public domain, and also that it was collating the information and would co-operate with the inspection.
Further, it indicated that the link between the enquiry and resignations of independent directors a few months ago was tenuous. Independent directors Subodh Kumar and Neharika Vohra had quit the Zee board last year, citing multiple issues including film advances to the tune of over Rs 2,000 crore and receivables from related parties.
After the December quarter results, the firm indicated that receivables were at Rs 2,330 crore.
Within this, receivables from related parties DishTV and SitiCable stood at Rs 750 crore, of which Rs 350 crore was overdue. The two account for 27 per cent of domestic subscription revenues.
indicated that it would be able to recover its dues from Siti Cable over the next year, and from DishTV over the next 24 months.
A head of research at a domestic brokerage indicated that the correction over the last couple of trading sessions had factored in the information related to the MCA.
Analysts are advising investors to avoid the stock as there is no clarity on how long the enquiry of the MCA
will last, as well as on its findings.
Worries pertaining to a change in management control, high investments in a weak demand environment, monetisation of content, as well as regulatory changes, are factors expected to keep the Zee stock under pressure over the near term.