The dissolution of the Zee-Sony merger agreement could reshape the Indian media sector with new permutations and combinations of media firms likely joining hands. 

With limited cash and slumping valuation, Zee has to find a new partner for itself, according to experts. Sony, on the other hand, needs someone which can help it quickly scale up its offerings to non-urban areas and regional language audiences.

Abneesh Roy of Nuvama Institutional Equities said, “(Zee’s) near term stock will be under pressure and go back to its pre merger multiple of 12-13x p/e multiple. Given uncertainties on a new partner, a legal case with Sony of $90 million, likely a deal between Viacom of RIL and Disney, will be a risky bet to bottom fish. Expect stock to test below 200 in near term due to above reasons. Expect a lot of downgrades in the near term by Street.” 

To make matters worse, Zee has very little cash at hand, less than ₹500 crore to make the necessary investments to ward off competitive pressures.

Consolidation of players

Hours after Sony’s announcement of termination, Sanjay Pugalia heading Adani’s media ventures tweeted a picture with Zee MD Punit Goenka at the Ayodhya leading to speculation that Zee could merge with the Adani group. There is, however, no formal announcement on this yet.

This comes even as Reliance-backed Viacom18 has signed a merger term sheet with Disney’s India operations. The other big worry for both Zee and Sony is that tech firms including Google and Meta are talking away a large share of the digital advertising revenue in India.

While Disney and Viacom have nearly solidified their plans to merge, both had separately exhibited interest in Zee and Sony in the past. Last year, several media reports noted that Sony had met with Disney executives in the US to discuss a likely merger of their Indian media businesses. Reliance had hoped to merge with Zee nearly two years ago after the then minority shareholder Invesco had tried to broker a deal between the two companies. 

Lloyd Mathais, Business Strategist and an Independent Director, said, “With global media giants Google and Meta well on top of the Indian media revenue charts – there really leaves room for 2-3 big, consolidated players.”  “Zee’s current financials will necessitate its hunt for a new partner. Whether that will be the Adani Group through their NDTV media interest or some other group is a matter of speculation.  Adani has a good presence in news media via NDTV and IANS. Will it make a bid/play white knight to Zee is to be seen,” he added. 

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