Zee Entertainment: Report Says SEBI Uncovers US$241mn Missing from Accounts, Company Denies
Moneylife Digital Team 21 February 2024
As part of its investigation into the founders of Zee Entertainment Enterprises Ltd (ZEEL), market regulator Securities and Exchange Board of India (SEBI) found that about Rs20bn (billion) or US$241mn (million) may have been diverted from the company, says a report quoting people familiar with the matter who did not want to be identified as the information is not public yet. That is roughly 10 times more than initially estimated by SEBI investigators, the people told Economic Times (ET). ZEEL, however, says media reports about SEBI uncovering accounting issues of the company are not true.
According to the ET report, the amount found missing is not final and may change after SEBI reviews the responses from the company executives. "The regulator has been calling in senior officials of ZEEL, including founders Subhash Chandra, his son Punit Goenka and some board members to explain their stance," the sources told the newspaper.
A SEBI representative did not immediately respond to an emailed request for comments sent by the newspaper. A spokesperson for Zee declined to comment on the fund diversion but told ET in an email that the company "has been in the process of providing all the comments, information or explanation requested" by the market regulator in the ongoing probe.
In a regulatory filing, ZEEL has denied media reports and rumours pertaining to accounting issues in the company, saying it as 'incorrect, baseless and false'.

"As disclosed in the Company’s statement of unaudited standalone financial results for the quarter and nine months ended 31 December 2023, published by the Company and available on its website, pursuant to the SAT order dated 30 October 2023 granting relief to the current key managerial personnel (KMP) of the Company, the Company has been in the process of providing all the comments, information or explanation requested by SEBI, and has extended complete co-operation on all aspects. In this regard, the Company is not aware of any order wherein SEBI has recorded any finding, and therefore, it has been falsely reported in the abovementioned news articles," ZEEL says.
Last month, CNBC-TV18 reported that SEBI may have zeroed in on the role of ZEEL's managing director and chief executive officer (MD&CEO) Mr Goenka in misuse of funds as key managerial personnel (KMP) in Essel group companies, and the investigation by the market regulator reveals Rs800 crore to Rs1,000 crore may have been siphoned against its previous finding of Rs200 crore.
SEBI has been investigating charges around fund siphoning and window dressing of books of accounts which allegedly benefited the promoter family of ZEEL.
In its order in August last year, SEBI alleged that Mr Goenka and his father, Subhash Chandra, former chairman of ZEEL, abused their positions as directors and KMP of a listed company by siphoning off funds for their own pecuniary benefit. Both were barred from holding any position in four companies of the ZEE group or any company formed following a merger, amalgamation or demerger of these companies. This includes ZEEL, Zee Media Corp Ltd, Zee Studios Ltd (a subsidiary of ZEEL), and Zee Akash News Pvt Ltd (a subsidiary of Zee Media).
During the hearing, Madhabi Puri Buch, chairperson of SEBI, noted that based on a letter of comfort (LoC), on 24 July 2019, Yes Bank adjusted the fixed deposit (FD) of Rs200 crore to meet the obligations of seven group companies of ZEEL, including Pan India Infraprojects Pvt Ltd, Essel Green Mobility, Essel Corporate Resources Pvt Ltd, Essel Utilities Distribution Co Ltd, Essel Business Excellence Services Pvt Ltd, Pan India Network Infravest Ltd and Living Entertainment Enterprises Pvt Ltd.
ZEEL submitted that these seven companies repaid the Rs200 crore liquidated by Yes Bank and there was no loss to the company.
However, after examining the bank statements of ZEEL, its associate entities and other entities, the market regulator noted that a significant portion of the Rs200 crore inflow in ZEEL originated from ZEEL itself or listed companies of Essel group or their subsidiaries, which, after passing through several layers, reached the accounts of those seven companies from where it ultimately went to ZEEL.
"Thus, the funds had followed a circular route where funds originated from ZEEL or listed companies of Essel group and their subsidiaries, passed through various entities including those owned or controlled by the promoter family and ultimately reached ZEEL," it added. (Read: ZEE Entertainment: SEBI Bars Subhash Chandra, Punit Goenka from Holding Any Position in 4 Companies; To Complete Probe in 8 Months)
Later in October, the securities appellate tribunal (SAT) set aside the SEBI order banning Mr Goenka from holding key managerial posts. "We also make it clear that any observation made in this order is prima facie observation and will not influence the investigation nor will it be utilised by either of the parties," the tribunal says.
Earlier in August 2023, while refusing to give any interim relief to Mr Goenka against the SEBI order, SAT said the market regulator cannot keep going on its investigation in the ZEEL matter.
During the hearing, justice Tarun Agarwala observed that the tribunal is not satisfied with the eight months mentioned for investigation by SEBI, after which the market regulator will serve a notice. "So it cannot go on indefinitely. We don't agree with the impugned order."
After just over two years of high drama, on 22 December 2021, Sony Pictures Networks India (now called Culver Max Entertainment) finally declared 'The End' on its merger with ZEEL. Sony also asked for a termination fee of US$90mn (million) from ZEEL over an alleged breach of the merger cooperation agreement (MCA). (Read: After Sony Split, Zee Plunges into a Cloudy Future. What Does It Say about Investment Savvy of Mutual Funds?)
In December 2021, Sony and Zee announced that they would integrate their television stations, film assets, and streaming platforms to build a media and entertainment powerhouse with a large base of 1.4bn (billion) viewers.
Under the terms of the deal, Sony would have owned 53% of the merged company, with Mr Goenka as the MD&CEO of the new entity.
The founders of ZEE had to dilute their stake in the company to tackle debt in 2019, and the Sony deal was struck amid a 2021 boardroom conflict with an overseas shareholder.
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