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SEBI discovers accounting irregularity of $241 million at Zee

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Less than a month after the collapse of its merger with Sony Group Corp’s local unit, Zee Entertainment Enterprises Ltd. faces another setback as India’s market regulator discovers a deficit of over $240 million in its accounts.

Sources as reported by bloomberg familiar with the matter, who requested anonymity as the information is not public yet, stated that the Securities and Exchange Board of India (SEBI) uncovered around 20 billion rupees ($241 million) diverted from Zee Entertainment Enterprises Ltd. during its investigation into the company’s founders. This amount is approximately ten times higher than SEBI’s initial estimate.

The identified missing amount is preliminary and subject to change pending SEBI’s review of responses from company executives. SEBI has summoned senior Zee officials, including founders Subhash Chandra and his son Punit Goenka, along with certain board members, to clarify their positions.

The individuals and entities named in the list include Simi Bhaumik, Mudit Goyal, Himanshu Gupta, Ashish Kelkar, Kiran Jadhav, Ramawatar Lalchand Chotia, SAAR Securities India Private Limited, Ajaykumar Ramakant Sharma, Rupesh Kumar Matoliya, Nitin Chhalani, Kanhya Trading Company, Manan Sharecom Private Limited, SAAR Commodities Private Limited, Partha Sarathi Dhar, and Nirmal Kumar Soni.

Sources familiar with the matter, who requested anonymity, revealed that SEBI’s probe into the Zee founders uncovered potential diversion of around 20 billion rupees ($241 million) from the company. This amount is approximately ten times higher than SEBI’s initial estimate, according to the sources.

SEBI has also directed the guest experts to pay ₹7.41 crore. According to SEBI, these experts made appearances on the Zee Business channel between February 1, 2022, and December 31, 2022. In its 127-page order, SEBI stated, ‘The facts of this case demonstrate a clear manipulation scheme to harm investors’ interests by misleading them into taking positions in securities, allowing profit makers to profit at the expense of investors.

A SEBI representative did not immediately respond to an emailed request for comments. A Zee spokesperson declined to address the fund diversion but stated in an email that the company is cooperating with SEBI’s ongoing probe by providing requested comments, information, or explanations.

These latest revelations from SEBI compound Goenka’s challenges as he endeavors to restore investor confidence following the collapse of Zee’s $10 billion merger with Sony. The termination of the two-year transaction in January concluded a prolonged deadlock over leadership of the new entity.

Extensive Dispute

The investigation into alleged financial misconduct by the father-and-son duo triggered a prolonged dispute between Sony and Zee starting from mid-2023. Sony hesitated to appoint Goenka as CEO in the merged entity due to concerns, while Goenka insisted on his promised role as per the 2021 merger agreement. The deadlock resulted in Sony abandoning the deal in January.

SEBI’s August order barred Zee founders Chandra and Goenka from executive or director roles in any listed company, citing abuse of power and fund diversion for personal gain.

Zee appealed SEBI’s order, securing a partial reprieve in October, allowing Goenka to hold an executive position during the investigation.

The merger aimed to benefit Sony with access to Zee’s extensive content library in regional Indian languages and to enhance Zee’s financial stability. Zee’s annual profit fell sharply by 95% in the twelve months up to March 31. While it posted a profit of 585.4 million rupees for the quarter ending December 31, it fell short of analyst expectations.

You might also be interested in – SEBI prohibits 15 guest experts from Zee Business channel for illegal trading, imposes ₹7.41 crore fine on them

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