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Fate of Sony-Zee merger if SEBI moves Supreme Court on SAT order on Punit Goenka

Elara Capital’s Karan Taurani weighs in on probable scenarios in the wake of the market regulator approaching the apex court

As SEBI is likely to move to the Supreme Court to appeal for a stay against SAT’s order allowing Punit Goenka to hold key managerial posts in the company and other group firms, there is still a high likelihood of the Sony-Zee merger going through without Goenka.

Commenting on the probable scenario in the wake of the market regulator approaching the apex court, Karan Taurani, SVP- Research Analyst (Media, Consumer Discretionary and Internet), Elara Capital, said, “We believe there is a low likelihood of Sony allowing Punit Goenka to continue as CEO of the merged company unless the issue with SAT is resolved (in case of SEBI going to Supreme Court). In this case, there may be a delay in the merger too, if Punit Goenka changes his stance and waits for the outcome of the investigation. If Sony does not wait, then the merger will go through as usual and the merged company will get listed by Jan’24.”

Taurani also pointed out that there would be no overhang of corporate governance issues in the new merged entity.

“With Sony coming as a parent company, we expect no CG (corporate governance) issues in the future, which in turn will drive re-rating of valuation multiples for Z,” he said.

Here is the chronology of events in SEBI order against Goenka

• On 12 June 2023, SEBI banned Zee promoters Subhash Chandra and Goenka from holding directorial, key managerial roles over allegations of fund siphoning.

• On 13 June 2023, Zee promoters approached SAT against the order following which SAT provided SEBI 48 hrs. to file a reply against Zee’s plea.

• On 10 July 2023, two weeks were provided by SAT to Zee promoters to file a response against the interim order. Meanwhile, Zee formed an interim committee of senior executives to run operations at the company.

• On 14 August 2023, SEBI asked for 8 months to complete the investigation of alleged fund diversion by Zee promoters (due to significant red flags in the transactions between Zee and Essel entities) which was again challenged by Zee on 26 August 2023.

• On 27 September 2023, SAT reserved order on the case after hearing from both parties.

• On 30 October 2023, SAT quashed SEBI’s order barring Punit Goenka from holding key directorship in listed entities over the alleged fund-diversion case.


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