Report: SEBI Discovers $241 Million Accounting Problem At Zee

Less than a month after Zee Entertainment Enterprises Ltd.’s merger with Sony Group Corp.’s local subsidiary failed, the market regulator has discovered a gap in the company’s accounting of more than $240 million. Zee’s stock dropped.

According to people familiar with the situation who wished to remain anonymous because the details are still under wraps, the Securities and Exchange Board of India, or Sebi, discovered during its investigation into the Zee founders that roughly 20 billion rupees ($241 million) may have been embezzled from the business. According to the persons, it is a tenfold increase above the first estimate provided by Sebi investigators.

Zee shares dropped as much as 15% in Mumbai trading—the highest it has fallen in a month—before partially recovering. The benchmark S&P BSE Sensex was slightly higher, per Bloomberg data.

According to the persons, Sebi’s evaluation of the firm leaders’ comments may result in a modification to the sum that was first reported missing. They said that the regulator has been contacting key Zee personnel, including the company’s founders Subhash Chandra and his son Punit Goenka, as well as a few board members, to clarify their position.

An email request for comments was not immediately answered by a Sebi spokesman. In an email, a Zee representative said that although the business “has been in the process of providing all the comments, information or explanation requested” by the markets regulator in the ongoing investigation, the spokesman would not comment on the money diversion.

As the CEO of Zee attempts to reassure investors after the collapse of its $10 billion merger proposal with Sony, Sebi’s most recent findings compound Mr. Goenka’s problems. Two years in the process, the deal was called off in January after a protracted impasse over the new entity’s leader.

The Economic Times said on Tuesday that Zee and Sony are getting back in touch to see if the merger can be salvaged, but there are still significant disagreements. The story did not specify where the information came from. The Indian media company made it clear that it is not taking part in any talks to bring the Sony deal back in a late-evening filing on Tuesday.

Since mid-2023, Sony and Zee have been embroiled in a lot of back-and-forth over the regulatory investigation into the father-and-son team’s alleged financial irregularities. Since Goenka was promised the CEO position in the 2021 merger agreement, Sony was hesitant to have him lead the combined company. Mr. Goenka, however, refused to back down. In the end, the impasse resulted in Sony abandoning the agreement in January.

The founders of Zee, Mr. Chandra and Mr. Goenka, were prohibited by an August decision from holding executive or director roles in any listed company by Sebi, which concluded that they had “abused their position” and siphoned off money “for their own benefit.”

Zee protested Sebi’s ruling to a higher appellate body, and in October, they were granted a partial respite that let Mr. Goenka to continue serving as an executive while the investigation was ongoing.