India regulator finds $240 mln diverted out of Zees books, sources say

The amount was 10 times higher than investigators had initially estimated, said one of the sources.

Zee's shares tumbled 11% in Wednesday morning trade, adding to a steep share decline since its $10 billion merger with Sony Group (6758.T), opens new tab was scrapped by the Japanese firm last month.

The Securities and Exchange Board of India (SEBI)said last year that Zee Group's founders, former Chairman Subhash Chandra and his son current CEO Punit Goenka, were actively involved in diverting company funds to the group's other listed entities and firms related to its founding shareholders. Both men have denied any wrongdoing.

Zee said in a statement that "reports and rumours pertaining to accounting issues in the Company are incorrect and false," adding that is in the process of providing all the information that has been requested by SEBI.

Chandra and Goenka did not immediately respond to Reuters requests for comment on Wednesday.
SEBI also did not immediately respond to a request for comment.

The regulator is due to issue its final findings and penalties in mid-April, said the second source.

Sony terminated its proposed merger between its local unit and Zee due to certain unresolved "closing conditions" and leadership disputes, including disagreements over Goenka's involvement in regulatory matters. The shares have lost about 25% since the merger was scrapped.

India's Economic Times reported on Tuesday that Zee was making a final attempt to restart discussions with Sony to revive the deal. Zee has denied being involved in any such negotiations.

In October, an Indian tribunal lifted a ban that prevented Goenka from holding board positions while granting SEBI eight months to finish its wider investigations.

The news of a $240 million accounting irregularity in Zee's books was first reported by Bloomberg.

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India regulator finds $240 mln diverted out of Zee's books, sources say

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