Global brokerage agency CLSA has revised its advice on Zee Entertainment, altering it from a earlier ‘purchase’ score to a ‘promote.’ This replace is available in response to the cancellation of the $10 billion mega-merger with Sony Pictures Network.

“With Zee-Sony merger being terminated, we believe Zee’s PE will slump back to 12x levels, seen prior to the Sony merger announcement in August 2021,” the brokerage agency acknowledged.

Also learn: Mint Explainer: The collapse of Sony-Zee merger and its wider implications

The international brokerage agency has additional slashed the goal worth of Zee Entertainment inventory by 34% to ₹198.

Sony has formally requested Zee to halt the merger, whereas concurrently searching for a termination payment of $90 million, alleging breaches on the a part of the Indian media large. Sony has escalated the matter by initiating arbitration proceedings in opposition to Zee.

Contrarily, Zee is difficult Sony’s assertions of breach, contending that its CEO, Punit Goenka, was even ready to step down within the spirit of facilitating the merger.

The cancellation of the extremely anticipated merger has reignited considerations about Zee’s company governance, particularly in gentle of the unprecedented promoter share pledging disaster in 2019. During that disaster, the corporate’s promoters, the Essel Group, repaid loans by means of a number of stake gross sales to traders.

Also learn: Sony demands $90 mn from Zee after terminating deal

Meanwhile, CLSA highlighted the appreciable aggressive challenges anticipated for Zee, serving as an extra deterrent for the inventory. The agency foresees heightened competitors within the media sector, notably with the reported merger of Reliance and Disney Star.

The brokerage agency additionally sees a decline within the valuation of the corporate. “ With the merger terminated, Zee’s valuation will probably decline to 12x PE ranges (Aug 21) seen previous to the merger announcement.”

CLSA analysts posit that the Zee-Sony merger might have successfully tackled Zee’s situation of low promoter possession. Following the merger, Sony would have possessed a controlling 51 % stake within the mixed entity.