The sell-off in Zee Entertainment Enterprises (ZEEL) shares continued on Monday, with stock price hitting a 10% lower circuit limit in intraday trade even after the National Company Law Appellate Tribunal (NCLAT) stayed the insolvency proceedings against the media company that put merger plans with Sony at risk. Hearing a plea of Punit Goenka, MD and CEO of ZEEL, the tribunal stayed the bankruptcy proceeding initiated by the National Company Law Tribunal (NCLT) and asked IndusInd Bank, a financial creditor which filed the insolvency plea against the broadcaster, to file its reply in two weeks.

“We wish to update you that an appeal was filed by Punit Goenka before the National Company Law Appellate Tribunal challenging the order dated February 22, 2023 passed by the National Company Law Tribunal, Mumbai Bench,” ZEEL said in an exchange filing on Friday.

“The appeal was heard today wherein, NCLAT has issued notice — directed IndusInd Bank Ltd to file its reply in two weeks and the company to file rejoinder in two weeks thereafter. The appeal is now listed for final disposal on March 29, 2023 and till that time the order dated February 22, 2023 passed by NCLT is stayed,” the company added.

Despite the favourable ruling by the NCLAT, ZEEL shares declined as much as 10% to hit an intraday low of ₹176.6 against the previous closing price of ₹195.60 on the BSE. Finally, the stock ended at ₹183, down 6.44%, with a market capitalisation of ₹17,577.51 crore. There was a surge in volume trade as 7.12 lakh shares changed hands over the counter as compared to the two-week average volume of 6 lakh stocks.

The stock has fallen as much as 14.5% in the last three sessions after the NCLT Mumbai bench admitted a petition filed by IndusInd Bank to initiate insolvency proceedings against the Essel Group company. The agency appointed Sanjay Kumar Jhalani as the interim resolution professional (IRP) for the process.

In an order dated February 22, 2023, the bankruptcy court admitted the insolvency proceedings against ZEEL after it failed to fulfill its debt obligations to IndusInd Bank regarding payment of more than ₹83 crore loan issued to Siti Networks. The court also admitted IndusInd’s insolvency plea against Siti Networks and appointed an interim resolution professional.

Despite relief from the appellate tribunal, the National Stock Exchange (NSE) is unlikely to revoke the ban on the new futures and options (F&O) segment of ZEEL after it was shortlisted under insolvency and Bankruptcy Code (IBC) framework. Last week, the exchange had barred ZEEL from the F&O segment of the exchange, saying that no future and options will be available for trading from April 28, 2023 onwards. However, all existing contracts with March and April expiries will continue.

In February last year, IndusInd Bank filed a bankruptcy case against debt-laden Zee Entertainment with the NCLT under the Insolvency and Bankruptcy Code (IBC). The case pertains to alleged default of ₹83.08 crore term loan facility issued to Siti Networks, a cable TV operator promoted by Essel Group. Zee was a party to the Debt Service Reserve Account Guarantee Agreement (DSRA Guarantee Agreement) signed with lnduslnd Bank for the term loan facility advanced to Siti Networks.

In December, private lender IDBI Bank moved NCLT seeking initiation of insolvency proceedings against ZEEL, claiming ₹149.60 crore of default under a debt service reserve agreement entered into by the bank and the company for the financial facility availed by SITI Networks. Besides, in April last year, Housing Development Finance Corporation Ltd (HDFC) also filed an insolvency application against SITI Networks Ltd for alleged default of ₹296 crore.

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