Mumbai: Axis Finance has approached the National Company Law Appellate Tribunal (NCLAT), Delhi against the National Company Law Tribunal (NCLT) order approving the merger of Zee and Sony. The NCLAT has served notice to Zee in response to Axis Finance's plea.

We believe the above issue of Axis Finance approaching the National Company Law Appellate Tribunal (NCLAT) will not have any impact on the merger between Zee and Sony because the claims being pursued by Axis Finance, which amount to Rs 1,000 mn, are not directed at Zee but rather at its parent company, Essel Group. As mentioned in the NCLT merger order (Zee/Sony), Axis Finance has previously approached various legal bodies, including the Debt Recovery Tribunal (DRT) and high courts, for above claims; however, judgements on the same have not been in their favour (Axis Finance). Therefore, we believe these claims lack merit and will not impact the merger. Also, appeals with NCLAT may continue for months even after the merged company is formed, just like in the case of PVR-Inox merger (Consumer Unity & Trust Society appealed in NCLAT against the merger and the case got dismissed in August 2023 - six months after the merged company of PVRINOX was formed).

As for the current status of the merger, the merged company is progressing with the Registrar of Companies (ROC) filing process, post receipt of the NCLT merger order. They are also engaged in discussions regarding Closing Precedents (CP) (the merged company may want to include July/August financials as well), which may result in a delay of two to three weeks in the merger timeline. We believe the record date is usually given one week prior to delisting. Considering the marginal delay in CP, the record date for the merger could be towards the last week of October 2023. Subsequently, relisting is expected to take place in the first or second week of December 2023 vs our earlier expectation of the second week of November 2023. Additionally, the company will need to submit details of the merged co. Board of Directors to the Ministry of Information & Broadcasting (MIB), before the record date is finalised.

Further, the SEBI/SAT issue (with promoters) too may not impact the merger timelines as the NCLT merger approval is without any condition.

We have a BUY recommendation on Zee with a 24 Sept TP of Rs 340 – we maintain our positive stance on the company; PFA our latest company update post the NCLT merger approval.

The credit of this article goes to Elara Capital SVP Karan Taurani.