SAT reserves order on ZEEL plea over Rs 3,143 crore fundraise

MUMBAI: Zee’s big fundraise has hit a small but significant pause. The Securities Appellate Tribunal (SAT) on Wednesday reserved its order on interim relief pleas filed by Zee Entertainment Enterprises Ltd (ZEEL) and its CEO Punit Goenka, as the company seeks to push ahead with a Rs 3,143 crore preferential warrant issue despite a Securities and Exchange Board of India (SEBI) order restricting their access to the securities market.

At the heart of the dispute is ZEEL’s proposed issue of preferential warrants to Sunbright Mauritius Investments, a promoter-group entity. ZEEL told the tribunal that shareholders had already approved the transaction and that it had received in-principle approval from the stock exchanges, leaving the company with a limited window to complete the fundraise.

Senior Advocate Ravi Kadam, appearing for ZEEL, sought a stay on the operation of SEBI’s 31 July order to allow the company to implement the approved resolutions. He also asked SAT to count the 15-day period prescribed under Regulation 170 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations from 12 August.

The timing matters because ZEEL is seeking a 14-day window to complete the transaction while the market-access restrictions remain in force. The proposed fundraise would bring Rs 3,143 crore into the company, but ZEEL argued that delaying the issue could affect its economics because the pricing of a preferential issue is linked to the company’s market price.

SAT, meanwhile, questioned SEBI on why ZEEL should be prevented from completing the fundraise during its two-month market-access restriction if the transaction could otherwise be undertaken once the restriction ends.

SEBI opposed the interim relief, arguing that allowing the preferential issue while ZEEL is barred from accessing the securities market would weaken the effect of the restriction imposed following the alleged regulatory violations.

The regulator also objected to Punit Goenka’s participation in the transaction. SEBI submitted that Goenka is the ultimate beneficial owner of Sunbright Mauritius Investments and is himself subject to a one-year securities-market ban. Allowing the warrants to be allotted through the Mauritius-based entity, it argued, could effectively provide Goenka with indirect access to the securities market.

Goenka’s counsel countered that the warrants would be issued to Sunbright Mauritius Investments and not directly to the ZEEL chief executive. The counsel also stressed the importance of the Rs 3,143 crore infusion for ZEEL and the potential impact of delaying the transaction.

The SEBI action stems from allegations concerning title documents relating to a Hyderabad property owned by ZEEL. According to the regulator, the property documents were handed over to Indiabulls Housing Finance as security for loans taken by promoter-linked private entities without the necessary corporate approvals.

SEBI’s counsel, Senior Advocate Chetan Kapadia, argued that ZEEL’s property had been used as security without board authorisation and that related-party transaction requirements had not been complied with before the security was created or the title documents handed over.

ZEEL has disputed the allegations, maintaining that the documents were taken without authorisation and that there was no direct finding establishing the company’s knowledge. The company has also argued that it did not itself engage in fraudulent activity in the securities market.

With SAT now reserving its order, ZEEL’s Rs 3,143 crore fundraise remains in regulatory limbo. The tribunal’s decision will determine whether the company can proceed with the promoter-group warrant issue during the market-access restrictions and whether the requested 14-day window can effectively begin from 12 August.