Zee shares plunge over 30% after Sony calls off merger
economictimes.indiatimes.commerger deal with Sony and the likely subsequent legal and regulatory implications.
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Top brokerages downgraded their ratings and cut target prices on the stock as analysts believe that the share price will be under pressure at least for now. The sell-off on Tuesday wiped off ₹7,285 crore in market capitalisation to ₹14,974.50 crore.
Zee shares closed at ₹155.9 on the BSE before touching their 52-week low of ₹152.5 on the exchange. Out of the total traded quantity of 22.84 crore shares on the NSE, the deliverable quantity was 9.57 crore. This amounts to 41.89% of the traded quantity.
Analysts' price targets on the stock have been lowered from ₹150 to ₹200 per share after the deal was called off on Monday. Earlier, the price target range was ₹275 to ₹430. Brokerage CLSA, which downgraded the stock to sell after the event, said the stock's valuation will de-rate.
With Zee-Sony merger being terminated, we believe Zee’s PE (Price to Earnings Ratio) will slump back to 12 times levels, seen prior to the Sony merger announcement (August 21),” said CLSA’s analysts Deepti Chaturvedi and Saurabh Mehrotra in a note to clients. “This was also the period of Covid-19 second wave, while Zee’s stock PE had also de-rated in the past during the promoter share pledging crisis (in 2019) and the fall in business cash conversion.” Based on the PE ratio of 12 times, CLSA cut the stock’s price target to 198 from 300.
The proposed merger of Zee Entertainment with Sony, announced in September 2021, was set to create the country’s largest broadcast company. Analysts said the impact of this move has raised uncertainty about the stock’s prospects.
“Zee is facing a legal overhang
