Zee Entertainment shares witnessed a significant drop of 30% in a single trading session, with the stock currently trading at Rs 161. The lower circuit has been adjusted to 35%.
The decline comes after Sony terminated its merger cooperation agreement (MCA) with Zee, ending more than two years of deliberation. Sony is seeking a termination fee of USD90 million, citing an alleged breach of the MCA by Zee. In response, Zee has stated that it will assess all available options, including legal action. Notably, Punit Goenka, Zee’s MD and CEO, has reportedly agreed to step down, a contentious issue in the dispute.
Motilal Oswal Financial Services downgraded its rating on the stock to Neutral in light of these developments.
Zee's financial performance has been lackluster over the last four years, experiencing a 14% decline in ad revenue from FY20 to FY23 due to weak market conditions and sustained market share losses over the past 4-5 years, dropping from over 20% to sub-17-18%.
The report notes that in the evolving landscape shifting towards OTT platforms, Zee5 faces challenges, playing a secondary role in a market dominated by robust players like Disney, Netflix, Amazon Prime, and Network18 led by Reliance Industries. This is a departure from the linear TV market, where Zee has historically held a prominent position among the top two players. The challenging circumstances raise concerns about Zee's competitive standing in the evolving media and entertainment landscape.
(With Agency Inputs)