Zee Entertainment Enterprises Ltd (ZEEL) fell more than 12 percent on Monday after the media company invested Rs 522 crore in tech subsidiary Margo Networks. ZEE has 80 percent stake in Margo.

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Margo Networks offers content distribution services under the brand name "SugarBox".

On April 9, the media conglomerate in its BSE regulatory filing said, "We had acquired 80 percent equity stake in Margo Networks Private Ltd (Sugarbox) in 2017. The company will invest Rs 522 crore in SugarBox over a period of time. The company is a related party and no promoter/promoter group companies have interest in SugarBox."

In 2017, Zee Entertainment had picked up about 80 percent in Margo for Rs 75 crore. The Street views it has a bad investment given that the tech company expects to close FY20 with a revenue of just Rs 47 lakhs.

As a result, the shares of Zee Entertainment plunged over 12 percent to Rs 132. At 11:53 am, the company was trading 11 percent lower at Rs 133 per share on the NSE.

This investment is made to exploit strong synergies of the technology developed by SugarBox, the company had said in the filing.

Recently, Margo had secured long-term exclusive contracts with public transport corporations, including a Letter of Award (LOA) to power trains operated by the Indian Railways, Kolkata Metro and all Wi-Fi enabled stations for a period of 10 years.

The SugarBox platform is expected to reach 25 million users daily and 300 million monthly unique users by mid-2022, spending an aggregate of 2.5 billion hours monthly in a near-captive environment, where access to apps is limited due to patchy connectivity.

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First Published:Apr 13, 2020 11:54 AM IST