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Notwithstanding all the negative news surrounding Sebi’s investigation and denial of renewed merger talks with Sony, shares of troubled media company Zee Entertainment rallied up to 2.67% to the day’s high of Rs 168.95 on BSE on Thursday.

The upside comes after the stock ended Wednesday’s session 15% lower after Bloomberg reported that Sebi had found that about $241 million (Rs 2,000 crore) might have been diverted by the company promoters.

“The reports and rumours pertaining to accounting issues in the company are incorrect and false. Pursuant to the SAT order, which granted relief to the current key managerial personnel (KMP), the company has been in the process of providing all comments, information or explanations requested by Sebi, and has extended complete cooperation on all aspects,” Zee said.

ET had reported that Sebi will question the top management of Zee – including founder Subhash Chandra, chief executive and managing director Punit Goenka, the chief financial officer, as well as current and past board members – on alleged fund diversion.

Also read | Sebi set to question ZEE top brass including Subhash Chandra and Punit Goenka on ‘fund diversion’

The proposed merger of Zee and Sony had led to a valuation re-rating of Zee in anticipation of an improvement in corporate governance and significant merger synergies.The stock has been the subject of multiple de-ratings and sell calls since the Sony deal was terminated. CLSA had downgraded Zee to SELL from BUY with a revised target price of Rs 198, Nuvama also reduced its FY25E/26E EPS on Zee by 16%/24% and downgraded the stock to reduce rating with a target price of Rs 190.Elara had downgraded Zee to sell with a target price of Rs 170 while Motilal Oswal had also downgraded the stock to neutral with a target price of Rs 200.

In the December quarter, Zee had reported 141% YoY growth in its consolidated net profit at Rs 58.5 crore while its revenue fell 3% YoY to Rs 2,045 crore. The company anticipates a gradual recovery in margins to start reflecting from H2 FY25 while aspiring to register an EBITDA margin of 18-20% for FY26, along with 8-10% revenue CAGR going forward.

Though the company is actively implementing measures to revive the business and efficiently run business operations as a stand-alone entity, analysts say concerns around weak financial positioning, corporate governance, and litigation outcomes continue to remain.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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