Zee Entertainment Enterprises: Analysts bullish on ZEE after CCI’s conditional approval to SPN deal – Blue Barrows

Mumbai: Shares of Zee Entertainment Enterprises (ZEE) jumped 4.65% on Thursday as investors cheered the conditional approval by the Competition Commission of India (CCI) for its merger with Sony Pictures Networks India (SPN). Analysts expect more upsides in the stock over the next year on the grounds that its valuations are cheap. The stock closed at ₹280.5 on Thursday.

Edelweiss said the stock has the potential to return 30-40% in the next 7 to 12 months after receiving the in-principle – albeit conditional – nod from India’s anti-trust regulator for the merger with Sony. The brokerage has raised its price target on the stock to ₹390 from ₹370.

“…by that time merger will be done, corporate governance issues will be resolved as the merged entity will be a Sony-dominated board and ad revenues will be back,” said Abneesh Roy, executive director and head of research – institutional equities, Edelweiss Securities, in a note to clients. “The merger is unlikely to face any major hurdles when put to shareholder voting on 14 October, 2022 (including from larger holders).”

Over 5.57 crore shares exchanged hands on BSE and NSE on Thursday, which was five times the average daily volume in the last month, Bloomberg data showed.

“The ZEE-Sony merger is a key rerating catalyst, in our view, and ZEE stock valuation is compelling,” said CLSA’s analysts Deepti Chaturvedi and Saurabh Mehrotra in a note to clients. “ZEE and Sony, when merged, will be listed in India, and Sony will hold a majority 51% and the merged company, will have cash of $1.5 billion.”

The brokerage has set a target price of ₹316 on the stock.

Credit Suisse said CCI approval for the merger has cleared a ‘key overhang’. “Following this, we believe the merger is now merely procedural…,” said the brokerage’s analyst Pratik Rangnekar in a client note. “Given the challenges that the Indian media industry is facing…, we believe that the merger (despite the conditions) is a significant and positive development.”