Shares of India's Zee Entertainment fell nearly 14% on Tuesday, a day after Bloomberg News reported that Japan's Sony was planning to scrap the $10 billion merger of its India unit with the broadcaster.

Sony plans to file a termination notice before the extended Jan. 20 deadline to close the merger over an impasse regarding who will lead the merged company, Bloomberg reported on Monday.

Zee declined to comment, while Sony did not reply to Reuters' request for comment.

Shares of Zee were last down 10% and are on track for their worst day since April 2021, while Sony's stock is up 1.2%.

The deal to merge Zee and Sony's TV channels, streaming platforms and film assets was delayed after India's markets regulator in August barred Punit Goenka, Zee CEO and a candidate to lead the merged entity, from directorships of any listed company.

While an Indian tribunal lifted the ban on Goenka in October, Sony pushed for N.P. Singh, the managing director of its Indian operations, to head the merged company, instead of Goenka, local business daily Mint had reported.

"Any potential risk of the merger getting called off by Sony will have a significant negative impact on valuations," said Karan Taurani, an analyst at Elara Capital.

"We do not foresee Sony agreeing on Goenka becoming CEO, due to the ongoing investigation against him. However, there is a very small chance of Goenka putting the deal at risk due to him wanting to become CEO, even if term sheet and deal conditions mention that," Taurani added. (Reporting by Kashish Tandon in Bengaluru; Editing by Varun H K)