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Research Macroscope Zee-Sony Merger: A Long Lost deal

Zee-Sony Merger: A Long Lost deal

Written by - Fisdom Research

January 24, 2024 5 minutes

Executive Summary

In a significant turn of events, Zee’s shares experienced a sharp decline of over 30% in a single day following the cancellation of the $10 billion merger deal with Sony Group, attributed to unmet demand. This analysis delves into the mutual fund landscape, examining which Asset Management Companies (AMCs) maintain ZEE Entertainment in their portfolios and those that have chosen to remain underweight in the wake of these developments. Notably, actively managed mutual funds display diversified holdings, with many opting for a conscious underweight position in the company over an extended period.

Considering actively managed equity funds,

  • Within the landscape of Asset Management Companies (AMCs), 13 have consistently maintained zero exposure to ZEE Entertainment. Interestingly, 10 of these 13 AMCs have steadfastly held zero exposure to ZEE Entertainment throughout the past 12 months. In contrast, three AMCs showed a modest exposure to ZEE in the calendar year 2023. Of Which, both Quant MF and LIC MF scaled back their exposures in July 2023, while Shriram AMC opted for a complete exit from the stock in April 2023.
  • As of December 23, Asset Management Companies (AMCs) with the least amount invested in terms of market value include PGIM India MF with ₹1 crore, Union MF with ₹2 crore, and ITI MF with ₹3 crore.
  • The Asset Management Companies (AMCs) with the largest investments in terms of market value were ICICI MF with ₹1,751 crore, Nippon India MF with ₹1,362 crore, and HDFC MF with ₹1,211 crore.
  • The mutual fund industry’s collective exposure to ZEE stands at INR 8,680 crore, which is less than one percent of the industry’s total equity Assets Under Management (AUM).

Unravelling the Decline: Key Highlights of ZEE Entertainment’s Downturn

Source: ACEMF, Fisdom Research. Data as on 23rd Jan 2024

The big $10-billion deal between Zee Entertainment (ZEEL) and Sony Pictures has fallen apart. Sony officially ended the deal on January 22 because ZEEL couldn’t meet certain conditions by the January 21 deadline, and an extension agreement couldn’t be reached. Sony is now asking for $90 million from ZEEL as termination fees. The deal faced many problems, like banks objecting, legal battles, and ZEEL going into a process to fix its financial issues. The National Company Law Appellate Tribunal (NCLAT) had to deal with multiple appeals against the merger, making things even more complicated. Regulatory issues with the Securities and Exchange Board of India (SEBI) also added to the problems, leading to the collapse of the deal.

Click on the image below for an interesting take by Fisdom’s Research Head, Nirav Karkera, in the morning call held on 23rd Jan 2024. He discussed ZEE’s institutional investors and estimated a 40% decline in stock price amid the ZEE-Sony merger deal call-off.

Actively managed mutual funds safeguard investor interests

Most actively managed mutual funds have been proactive in identifying challenges with the merger deal while ensuring minimal exposure to the stock within actively managed portfolios.

Most mutual funds have consciously maintained reasonably lower allocations.

Below is a list of mutual fund houses that have exposure to ZEE Entertainment Ltd:

AMC NameActive + Passive AUM (in Crores)Active AUM (in Crores)Active AUM as % of Total Equity AUM
ICICI Pru MF₹ 1,929₹ 1,7510.48%
Nippon India MF₹ 1,615₹ 1,3620.52%
HDFC MF₹ 1,389₹ 1,2110.37%
Kotak MF₹ 681₹ 4530.22%
Aditya Birla SL MF₹ 610₹ 4580.32%
Tata MF₹ 547₹ 3840.51%
HSBC MF₹ 361₹ 3150.53%
Sundaram MF₹ 259₹ 2500.60%
DSP MF₹ 214₹ 870.10%
Bandhan MF₹ 177₹ 730.18%
UTI MF₹ 157₹ 950.04%
SBI MF₹ 137₹ 140.00%
Invesco MF₹ 127
Edelweiss MF₹ 125₹ 170.06%
Axis MF₹ 88₹ 30.00%
Mahindra Manulife MF₹ 86₹ 860.61%
Franklin Templeton MF₹ 58₹ 580.08%
NJ MF₹ 46₹ 280.60%
Mirae MF₹ 26₹ 90.01%
Motilal Oswal MF₹ 17
PPFAS MF₹ 10₹ 50.01%
PGIM India MF₹ 9₹ 10.01%
Union MF₹ 4₹ 20.02%
ITI MF₹ 3₹ 30.06%
Baroda BNP Paribas₹ 2
Zerodha MF₹ 1
Navi MF₹ 1
Bank of India MF₹ 1
Groww MF₹ 0
Trust MF
Samco MF
Quant MF
Bajaj Finserv MF
WhiteOak Capital MF
Taurus MF
Canara Robeco MF
360 ONE
Quantum MF
Helios MF
Shriram MF
Total Exposure of AMCs to ZEE Entertainment Ltd.₹ 8,680₹ 6,6670.22% 

Source: ACEMF, Fisdom Research. Portfolio as of December 2023

Out of the 42 Asset Management Companies (AMCs), only 29 have invested in ZEE, while the remaining 13 hold a very small amount of the stock. Among these 13 AMCs, excluding Trust AMC, which exclusively deals in debt funds, the other 9 have maintained no exposure to ZEE over the last 12 months. Notably, the 3 AMCs that did have exposure—Quant, LIC, and Shriram—reduced their holdings 6-9 months ago.

ICICI Mutual Fund holds the highest exposure to ZEE; however, this exposure represents just 0.5% of its total equity Assets Under Management (AUM). Importantly, ICICI AMC has not increased its exposure to ZEE, and in the last 6 months, it has either reduced or maintained flat exposures across all its actively managed equity funds.

Fund Level Exposures – Actively managed, diversified equity funds and sectoral funds

  • Equity Oriented funds with the highest allocation to ZEE Entertainment Ltd
Scheme NameCategoryAMC Name% Holding
Edelweiss Equity Savings Fund-Reg(G)Equity SavingsEdelweiss MF4.0
Aditya Birla SL Equity Savings Fund-Reg(G)Equity SavingsAditya Birla SL MF2.4
Nippon India Focused Equity Fund(G)Focused FundNippon India MF2.4
DSP Dynamic Asset Allocation Fund-Reg(G)Dynamic Asset AllocationDSP MF2.2
HSBC Balanced Advantage Fund-Reg(G)Balanced AdvantageHSBC MF2.2
Tata Large & Mid Cap Fund-Reg(G)Large & Mid CapTata MF2.2
DSP Equity Savings Fund-Reg(G)Equity SavingsDSP MF2.0
Tata Multicap Fund-Reg(G)Multi Cap FundTata MF2.0
Nippon India Multi Cap Fund(G)Multi Cap FundNippon India MF2.0
Kotak Multicap Fund-Reg(G)Multi Cap FundKotak MF1.9

Source: ACEMF, Fisdom Research. Portfolio as of December 2023

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