Moments before their much-awaited merger with Sony, Zee has got mired in a controversy. The threat of insolvency regarding one of previous loans looms large.
Zee under insolvency
Siti Networks Ltd., a multi system operator company promoted by Essel Group itself had taken a loan of Rs 150 crore from IndusInd Bank Ltd. Funny thing is that the bank refused to grant this money based on Siti’s own reputation. It had to bring a guarantor and Zee, another company owned by the Essel group had pitched in.
Somehow, Siti Networks has been able to pay on Rs 67 crore of this amount. The other Rs 83 crore is still due. In fact, Siti even failed to maintain the account from September 2019 and has been a continuous defaulter since then. When the matter reached the National Company Law Appellate Tribunal (NCLAT), IndusInd Bank requested the tribunal to make Zee liable for such defaults.
On its part Zee tried to argue that until 2020, the bank hadn’t explicitly invoked the guarantee. It also said that the claim can’t be over Rs 69 lakhs. The Mumbai Bench of NCLAT didn’t accept its arguments and put both Zee and Siti under the insolvency resolution process. Sanjeev Kumar Jalan, a partner in professional services firm BDO, and Mohit Mehra are respective resolution professionals for both companies.
Also Read: Get ready for a majestic cinema experience as PVR and INOX are all set to merge
Doubt on Sony-Zee merger
Expectedly, the market did not respond kindly to the news. Price tumbled by 14 per cent. For the six months and one year time-frame, it has fallen by 23 and 28 per cent respectively. In addition to that, NSE has removed Zee from Futures and Options category.
It also put a cloud of doubt on the proposed merger between Sony and Zee. Sony and Zee agreed to merge their linear networks, digital assets, production businesses, and programme libraries in December 2021. In the new company, Zee is supposed to play junior partner. After the completion of the transaction, Sony is supposed to own approximately 53% of the combined company, with Zee holding the remaining 47%. Moreover, Sony contributed $1.575 billion to the combined company.
The insolvency proceedings put a halt on the merger. The powers of the board of Directors stands superseded and any transfer of assets is not possible.
Zee only had two options. Pay the debt or find a way to stay the insolvency proceedings. It chose the latter one. Till March 29, proceedings have been put on hold. Hope it provides a buffer for it to redeem its position.
Support TFI:
Support us to strengthen the ‘Right’ ideology of cultural nationalism by purchasing the best quality garments from TFI-STORE.COM
