Brokerages Mixed as Zee Entertainment Resolves Merger Issue with Sony

Brokerages had a mixed response to Zee Entertainment after the company reported a settlement pact with Sony India over combination disputes.

What Happened: Zee Entertainment shares gushed on Tuesday following the company’s proclamation of a non-cash payment settling all debates related to its collaboration agreement with Culver Max Entertainment (operating as Sony Pictures Networks India) and its subsidiary, Bangla Entertainment (BEPL).

The settlement will lead to the departure of all claims against each other in the happening arbitration at the Singapore International Arbitration Centre, the National Company Law Tribunal (NCLT), and other forums, Zee said in press release.

Brokerage Views: Citi had a “sell” rating on the stock with a target price of ₹137. The brokerage noted that the settlement with Sony India is expected to ease investor concerns, especially about possible accountability for Zee resulting from the merger's termination. Investors are expected to closely watch Zee for any notable improvements in ad revenue performance post-settlement. However, Citi also expressed concerns about the potential effects of cost-saving measures, revenue, and competitive positioning, especially given the ongoing industry consolidation.

UBS kept a “neutral” rating on Zee with a target price of ₹180, viewing the settlement with Sony India positively as it removes a significant overhang and could enhance the company's stock performance.

Kotak Securities maintained a “buy” recommendation for the stock with a target price of ₹160.

Price Action: On Wednesday, Zee Entertainment’s shares declined by 0.88% to ₹149.50.