Cricket deal breakdown: ZEE seeks refund of Rs 6,854 lakh from Star India

Zee Entertainment Enterprises Ltd (ZEEL) has sought refund of Rs 6,854 lakh paid to Star India as part of the Alliance Agreement for ICC sub-license for television broadcasting rights.

On August 26, 2022, ZEEL had entered into an agreement with Star India for setting out the basis on which Star will be willing to grant sub-license rights in relation to television broadcasting rights of the International Cricket Council’s (ICC) Men’s and Under 19 (U-19) global events for a period of four years (ICC 2024-2027) on an exclusive basis (Alliance Agreement). The company/ Board had identified this acquisition of strategic importance ensuring the company is present in all three segments of the media and entertainment business. The performance of the Alliance Agreement was subject to certain conditions precedent, including submission of financial commitments, provision of bank guarantee and corporate guarantee and pending final ICC approval for sub-licensing to the company.

In a statement issued, ZEEL said that “Till date, the company has accrued Rs 7,214 lakh for bank guarantee commission and interest expenses for its share of bank guarantee and deposit as per the Alliance Agreement.”

During the quarter ended December 31, 2023, and subsequently, Star sent letters to the company through its legal counsel, alleging breach of the Alliance Agreement on account of non-payment of dues for the rights in relation to first instalment of the rights fee aggregating to $203.56 million (Rs 169,324 lakh) along with the payment for bank guarantee commission and deposit interest aggregating Rs 1,700 lakh and financial commitments, including furnishing of corporate guarantee/ confirmation as stated in the Alliance Agreement.

ZEEL maintained that based on the legal advice, the management believes that Star has not acted in accordance with the Alliance Agreement, and has failed to obtain necessary approvals, execution of necessary documentation and agreements. The management also believes that Star, by its conduct, has breached the Alliance Agreement and is in default of the terms thereof and consequently, the contract stands repudiated.

“ZEEL has already communicated to Star that the Alliance Agreement cannot be proceeded with for the reasons set out above and has also sought refund of Rs 6,854 lakh paid to Star,” the statement added.

The ZEEL Board continues to monitor the progress of aforesaid matter. Based on the available information and legal advice, the management believes that the company has strong and valid grounds to defend any claims. Accordingly, the company does not expect any material adverse impact with respect to the above, as in its view, the contract has been repudiated.