Zee Entertainment rallies sharply in one month on strong box office collection of ‘The Kashmir Files’ and on high hopes from Zee-Sony merger

• Shares of Zee Entertainment have rallied 21% in the last one month and outperformed the benchmark index that gained 11%.
• Analysts believe that the strong box office collection of movie “The Kashmir Files” and expectation of significant opportunities from the Zee-Sony merger has fuelled the stock.
• Moreover, there are hopes that the company’s revenue will cross ₹10,000 crore in next two fiscal years.

Things are finally falling in place for investors of Zee Entertainment Enterprises as shares of the company rallied sharply in the last one month and even outperformed the benchmark index.

Shares of Zee Entertainment rallied 21% in the last one month outpacing the benchmark index Sensex that gained 11%.

It seems like a rather fresh start for investors that literally made no money in the last five years of investment in this stock as shares of the company lost value by 45%. It was only after September 2021 that the stock picked up with reports of Sony-Zee merger.

The combined entity is likely to emerge as a strong player in both television (TV) and over-the-top (OTT) business by leveraging their ability to create content across genres and regional markets.

The merger has made the new entity one of the largest entertainment groups in the country. The combined entity is expected to make its mark in both TV and OTT business and create content across genres and regional markets.

“The merger is expected to strengthen ZEEL’s [Zee Entertainment Enterprises Limited] portfolio with Sony’s sport, kids, and English movie content. The combined entity will be in a superior position on maximising its revenue across platforms, including OTT, given its wider content choices, investments on digital, aggressive bidding for sports rights, and focus on leveraging Sony Group’s deep capability in gaming and presence in international markets,” said analysts at Sharekhan.

Financial estimates for coming years after Zee-Sony merger
(Source: Sharekhan Research)

Analysts expect the company’s revenue to cross 10,000 crore in next two fiscal years.

Another reason that cheered investors was the huge success of the movie ‘The Kashmir Files’ produced by Zee Studios, a subsidiary of Zee Entertainment. The film, featuring Anupam Kher, Mithun Chakraborty and Pallavi Joshi, made more than ₹100 crore. Along with it, the hit Tamil movie ‘Valimai’ also added money to the kitty.

Analysts at Sharekhan say that strong box office collections of ‘The Kashmir Files’ and ‘Valimai’ would drive revenue of other operating sales. They forecast Zee’s overall revenue to grow by 12.2% year-on-year in the fourth quarter of FY22.

Recent share sale by its largest investor Invesco brought some turbulence to the company’s stock. Invesco recently offloaded up to 8% of its stake in the company through the block deal on April 7, 2022. Invesco stated that the purpose of the sale is to only align its fund exposures to Zee with other funds managed by the investment team.


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