ZEE Entertainment Enterprises’ (ZEE) merger with Sony could lead to a few changes to index compositions and may also impact the stock, which is a part of futures and options segment. The index aggregator MSCI has announced its intent to exclude ZEE from MSCI Global Small Cap Indices on its last trading day, which is unknown yet. This, as per Nuvama Alt & Quantitative Research’s analysis, corresponds to a projected selling of approximately $22 million.
MSCI exclusion, likely inclusion later
Nuvama said given the merged entity’s significant market cap, the MSCI’s potential early inclusion of Sony-ZEE (merged entity) in the Standard Index post-listing could generate an estimated $230 million inflow. However, assessing the impact in terms of days is currently less meaningful due to differing trading volumes of freshly listed equities, it noted.
ZEE-Sony merged entity listing by November
Nuvama said the merged shares would not be immediately listed due to Sony’s unlisted status. Nuvama Alternative & Quant Desk anticipates ZEE’s final trading day to be around September-end or early October. It expects the merged entity to debut on the stock market within four to seven weeks after the standalone ZEE’s last trading day. Overall, Nuvama sees ZEE’s listing at around November, assuming a smooth process.
AMFI categorisation: Midcap to largecap?
Nuvama Alternative expects November relisting (assuming a smooth process) and suggested an AMFI categorisation shift from Midcap to largecap in the H1FY24 review (Feb 2024 to July 2024), with the announcement likely in early January 2024, based on an average six-month market cap till Decembe 2023.
F&O impact
Nuvama said, as per its understanding, ZEE’s futures and options contracts will expire on the last trading day. As per current methodology, new derivatives will require at least six months of listing and most importantly Sebi approval for inclusion, it noted.
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