Zee Entertainment stock under pressure after CFO Rohit Kumar Gupta resigns

As of June 19, Bloomberg showed that 7 analysts have a buy rating on Zee stock, 6 have a hold rating and 8 have a sell call on the stock.

Shares of Zee Entertainment are under pressure on June 19 after CFO Rohit Kumar Gupta stepped down citing personal reasons and the company informed that it has appointed an acting chief financial officer.

Mukund Galgali - head of Zee's commercial and strategic initiatives - who has been with the group for 17 years will will step into the interim role, Zee said.

At 9:41 am, ZEEL shares were trading 1.6 percent lower at Rs 158.34 on the National Stock Exchange (NSE). So far this year, the stock has plunged 44.66 percent, underperforming benchmark Nifty 50.

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Cost cutting and restructuring 

The media company recently implemented several measures to cut costs and reduce losses, including a 15 percent workforce reduction. Zee has also announced a restructuring of its leadership.

Earlier this month, Zee's board granted in-principle approval to raise up to Rs 2,000 crore through the issuance of shares or eligible securities. This fundraising approval follows Sony's scrapping of the $10 billion mega-merger with Zee in January this year.

Financial woes and green shoots

Zee's business has faced challenges over the years, with advertising revenue dropping to $488 million in 2022-23 from around $600 million five years earlier. Cash reserves have also decreased by approximately 25 percent during this period.

The company, however, swung to black in the latest quarter, from a year-ago loss. In the quarter ended March 2024, it reported a profit of Rs 13.35 crore against a loss a year ago, helped by strong demand for advertising and a fall in expenses.

Its domestic advertising revenue for the quarter rose nearly 11 percent on-year (YoY), driven by the continued recovery in the macro advertising environment and spending pickup by FMCG clients.

Brokerages bullish but headwinds remain

According to Nuvama Institutional Equities, with merger being called off, the competition intensity from Disney + Hotstar and Viacom of RIL shall dent Zee’s market share.

"We expect OTT losses for Zee to stretch going forward. However, higher penetration of DTH and the digitisation process augur well for decent growth in subscription revenue over the long term," the brokerage said in an earlier report.

Analysts also expect Zee's movie production revenue to remain volatile. "We believe ZEE shall be under pressure and it would be a risky bet to bottom fish," they said, adding that the absence of sporting events and fresh programming is likely to temper the subscription growth momentum in near term.

Nuvama double upgraded 'Zee' to 'Buy' rating in May with a target price of Rs 180.

Also Read | ZEE names Mukund Galgali as acting CFO after Rohit Gupta steps down

By managing costs and reducing losses in ZEE5, management aims to significantly improve overall profitability in FY25. JM Financial believes that significant progress has been made on the proposed roadmap since February 2024.

The company remains confident in achieving its long-term aspiration of up to 20 percent EBITDA margin by FY26.

"The interventions implemented will fully play out over the next three to four months, with some one-time costs expected in the near term," the brokerage said JM Financial when it upgraded the stock in May to 'buy' with a revised target price of Rs 170 per share.

Analyst calls and MF holding

As of June 19, Bloomberg showed that 7 analysts have a buy rating on Zee stock, 6 have a hold rating and 8 have a sell call on the stock.

Mutual Funds have decreased their holdings in Zee as data showed that three MFs exited the stock in the March quarter. Of the remaining 27 MFs that hold Zee stock, except for PPFAS Mutual Fund and SBI Mutual Fund, all other fund house reduced their holdings.

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