Zee Entertainment Stock Plunges 14%, This Brokerage Has A “Buy” Call

After hearing that IndusInd Bank’s insolvency case against Zee Entertainment Enterprises had been allowed by NCLT, the stock of that company fell 14% in trade today.
Below is a summary of the information that Prabhudas Lilladher provided.
Zee Entertainment Stock Plunges 14%, This Brokerage Has A “Buy” Call

What is the issue?

Siti Networks (sister concern of ZEEL) had taken a loan from IndusInd Bank wherein ZEEL stood as a guarantor. Since Siti Networks was unable to pay, IndusInd bank invoked the guarantee and made ZEEL a party to it. Amount under consideration is Rs 831mn. Apart from IndusInd Bank, as ZEEL has contingent claims from two more entities that are still under dispute.

Is ZEEL really insolvent?

Answering the question, Prabhudas Lilladher has said that ZEEL had a cash balance of Rs6,726mn as of Dec-2022 and hence even if it is made liable to pay to all the outstanding claims, it will be left with a cash balance of Rs2,285mn.

Buy the Zee stock with a price target of Rs 277, says Prabhudas Lilladher

According to Prabhudas Lilladher, after admission of insolvency proceedings by NCLT, the stock price has corrected by 10% (at the time of writing) as ongoing arbitration issue can delay the merger time-line with SPNI. “The next NCLT hearing is due on 09th March 2023 and unless ZEEL settles the dispute amicably or achieves a stay on the order, merger time-line can get delayed further. We retain BUY on the stock with a target price of Rs 277 (21x Sep-24 EPS). However, given there are concerns over delay in merger time-line (primary premise of our BUY call) the stock can be under pressure in near term,” the brokerage has said.

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