ZEE Entertainment Enterprises Ltd on Friday said that its board approved the formation of a three-member independent advisory committee to curb the "erosion of investor wealth". The decision has been taken after several media reports, including Fortune India, pointed to the erosion of investor wealth after the fallout of the company’s $10 billion merger deal with Sony Network India.

On January 31, this year, Fortune India reported that despite domestic institutions and foreign institutional investors owning 43.59% and 28.19% stake, respectively in the company, the investor wealth continued to erode.

The three-member committee will be headed by former Allahabad High Court judge Dr Satish Chandra and will have Uttam Prakash Agarwal and P V R Murthy as the independent directors.

"The Committee will independently provide guidance on the measures and future course of action that the Board is required to take in order to protect the interests of all the stakeholders of the Company,” says the company.

As per the stock exchange, amongst domestic investors, 29 mutual funds collectively own 32.49% and insurance companies own 10.66% by December 2023.  Life Insurance Corporation (LIC) is the largest owner among insurance companies with a 5.12% stake. SBI Life Insurance and HDFC Life Insurance own 2.12% and 1.85%, respectively.

Among FIIs, Government Pension Fund Global, Amansa Holdings Pvt Ltd and Vanguard International Value Fund are the top three stakeholders in Zee with 2.8%, 2.39% and 2.23% respectively.

Meanwhile, the company’s founder Subhash Chandra and his son Punit Goenka, CEO, ZEEL own only 3.99% of the company, which is even less than what a few ‘schemes’ of Mutual Funds own in ZEEL, according to analysts. 

Notably in the past two weeks, the company’s stock has lost 14.69% in value.

Last month, Japan’s Sony Group Corp India entity, Culver Max Entertainment, officially terminated two years of negotiations with ZEE for a $10 billion mega merger deal. The major reason cited behind the termination of the much-hyped deal is the inability to fulfil the merger agreement.

Following this, analysts have also given a negative outlook on the Indian media and entertainment company’s stock. Researchers at CLSA say with the merger terminated, Zee’s valuation will likely decline to "12x PE levels (Aug-21) seen prior to the merger announcement". The agency has downgraded the stock recommendation from “BUY” to “SELL”.

Elara Capital in its report downgraded the Zee share to "SELL", with the target price pared to ₹170. It says the merger with Sony was the "key valuation driver" to move up in the past two years. "But given the termination, we downgrade Z to Sell with March 2025E TP pared to INR 170 from INR 340." 

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