Zee Entertainment Enterprises' shares fell sharply on Monday, dropping 14%, after the National Company Law Tribunal (NCLT) approved a repayment plan connected to founder Subhash Chandra that implies a 99.97% haircut for creditors.

Under the tribunal-approved plan, creditors stand to recover approximately Rs 6.5 crore against admitted claims totaling Rs 22,006.57 crore — a reduction that has triggered a strong backlash from lenders, who are now moving to challenge the repayment plan in court.

The insolvency proceedings against Chandra stem from loan defaults linked to entities associated with the Essel Group, the conglomerate he founded. The proceedings relate to Chandra in his capacity as a personal guarantor for loans to Essel Group entities, a route that became available to creditors after India's Insolvency and Bankruptcy Code was extended to personal guarantors in 2019. Admitted creditor claims in the case had reached over Rs 22,000 crore, with lenders including public sector banks such as Canara Bank and Union Bank of India among the creditors involved.

The scale of the haircut — recovering roughly Rs 6.5 crore out of more than Rs 22,000 crore in claims — has made the case one of the most drastic debt reductions seen in an Indian insolvency resolution, and it has weighed heavily on sentiment around Zee Entertainment, the listed media company Chandra founded. Personal guarantor insolvency cases against high-profile promoters remain relatively rare in India, and the outcome of lenders' court challenge is likely to be watched as a test of how much guarantors can be made to repay when the underlying business debt is far larger.

Zee Entertainment shares extended their slide as lenders escalated their challenge to the tribunal's repayment plan. The company, one of India's largest television and film entertainment groups, is listed on both the BSE and the National Stock Exchange. It is separately navigating a difficult period for its business, having seen its proposed merger with Sony Pictures Networks India, announced in 2021, called off in January 2024 after regulatory and leadership disputes, adding to investor unease around the stock.

The development marks the latest chapter in a years-long saga of debt troubles surrounding the Essel Group and its founder, which previously led to stake sales and restructuring negotiations with lenders. In 2019, Chandra stepped down as chairman of Zee Entertainment amid the group's debt pressures, with the company selling stakes to financial investors as part of efforts to reduce the debt burden.

Source: Economic Times