NCLT Approves Zee-Sony Merger: Conditions Met, Debts Cleared, Zee’s Share Surges 16%

The National Company Law Tribunal (NCLT) from Mumbai Bench has granted approval today (August 10) to the merger of Zee Entertainment Enterprises Limited (ZEEL) and Sony Pictures Networks India (SPN). Along with this deal, all associated conditions have also been cleared by the NCLT.

After receiving NCLT’s approval, its order was kept confidential until July 10. Zee and Sony had agreed upon the merger in December 2021. The company had obtained approvals from NSE-BSE, SEBI, and CCI, and subsequently approached the tribunal for the final nod for the merger.

Following the approval of this deal, Zee’s share has surged by more than 16%, reaching Rs. 281.45 from Rs. 39.20. In the past month alone, the share has seen an increase of almost 40%. On the other hand, in the last 6 months, the share has risen by 28.90%, and in the last year, it has grown by 13.47%. Overall, the stock has increased by approximately 15.78% in 2023 so far.

IndusInd Bank’s share also saw a rise of 1.53%. The financial stakeholder in Zee Entertainment, IndusInd Bank, experienced an uptick in its share price. Its stock increased by 1.53% to reach Rs. 1,430. Within a week, it grew by 3.36%. In the past year, it has surged by more than 32.51%. IndusInd Bank had previously accused Zee of not repaying a sum of Rs. 83 crore and raised concerns regarding the Sony-Zee merger, which was taken up by NCLAT for consideration.

Subsequently, other stakeholders also raised concerns after IndusInd. Some lenders within the Essel Group have raised concerns about the inclusion of non-compete clauses in the scheme. As per the clause, Essel Group’s Essel Mauritius is set to receive Rs. 1,100 crores from the Sony Group’s SPE Mauritius as a non-compete fee. Certain lenders from the Essel Group, such as Axis Finance Limited, Jindal Steel & Power Limited, IDB Trustee Services, and E-Mix Corp, have counted this fee as an integral part of their dealings with the lenders.

How did the Zee-Sony merger come about?

Sony Pictures Networks India has had a long presence in the Indian television industry. The company started its first TV channel, Sony Entertainment Television, in India in 1995. The company wasn’t very successful in expanding its business. On the other hand, ZEEL, which started its first channel, Zee TV, on October 2, 1992, was able to grow its business more extensively.

ZEEL had been under the control of the Essel Group for a long time, but Essel was grappling with its own debt of $2.4 billion (INR 17,000 crore). This merger will now bring together both companies under a vast and diversified umbrella of viewership.

What benefits will the merger bring to both companies?

The new company will hold a 26.7% ownership share, with a commanding 63% stake in Hindi cinema. Currently, Star-Disney possesses the largest 18.6% ownership share. Sony Network will gain access to Zee’s vast library of 2.6 lakh hours of television content. Additionally, access to over 4,800 films in various languages will also be developed.

Currently, Zee doesn’t have a presence in the sports arena, but with the merger, it will gain access to Sony’s 10 sports channels. This includes Sony Six, Sony Ten 1, Sony Ten 2, Sony Ten 3, and regional channel Ten 4. This integration is expected to increase Zee’s market share and revenue in the sports broadcasting sector. The merger will also reinforce their position in the digital ecosystem. Together, they can compete with streaming giants like Netflix and Amazon.