ZEE Entertainment Enterprises Ltd (ZEEL) rose 1 per cent in Friday’s trade to take its winning run to the sixth straight session. The rally on the counter has been observed after a drop of nearly 15 per cent from August to October level, the period marked by weak market sentiment.
A major portion of this rally, said Emkay Global, came post SAT’s order, setting aside Sebi ruling, which had
restricted Punit Goenka from holding Directorial position or KMP in any listed company, including ZEEL. Emkay Global said after an uncertain period regarding top management of the merged entity, the market believes Punit Goenka’s return is positive owing to perception of his superior execution skills.
“This order paves the way for his appointment as MD of the merged entity and minimizes the risk of further
delay of the merger. We now expect re-listing of the merged entity in January 2024 The stock trades at 8.4 times Sep-25 broadcasting EV/Ebitda, which is reasonable,” Emkay Global said.
To recall, the Zee-Sony merger faced multiple roadblocks since it was first announced in September 2021. Post approval from the stock exchanges in July 2021, the CCI granted its approval to the merger in October 2022 after ZEEL agreed to sell 3 channels to address concerns on competition.
The NCLT, Emkay Global noted, approved the merger in August this year, quashing all objections from lenders.
“The merger is now close to completion, and we expect ZEEL’s delisting in another 3-4 weeks. We believe the
merged entity should relist in January 2024. Axis Finance and IDBI Bank have challenged NCLT’s ruling in the NCLAT which is being heard in the appellate tribunal,” it said.
The brokerage has maintained its ‘BUY’ rating on the stock with a target of Rs 335 per share. On Friday, the ZEE shares were trading at Rs 272.60 on BSE, up 1.23 per cent. Emkay’s target suggests 23 per cent potential upside on the counter.
“We are currently building-in revenue growth of 9-10 per cent over the next two years, coupled with margin enhancement, as the overall advertising environment improves and synergies are realised. The stock has traded at a 10-year average of 17 times, at 1-year forward EV/Ebitda, but has meaningfully de-rated in the last few years, post emergence of corporate governance issues and merger delay,” Emkay Global said.
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