ZEEL shares dip after promoter group gets Rs 660 crore warrant allotment

MUMBAI: Zee Entertainment Enterprises shares slipped nearly 2 per cent on Monday after the company allotted 20.94 crore convertible warrants to promoter group entity Sunbright Mauritius, bringing an upfront inflow of Rs 659.8 crore.

The shares traded 1.96 per cent lower at Rs 105.44 on the National Stock Exchange in morning trading.

The warrants were allotted at Rs 126 each. If fully converted, the company will receive a further Rs 2,639 crore, taking the total potential proceeds from the allotment to about Rs 3,299 crore.

Following full conversion of the allotted warrants, Sunbright Mauritius’ holding in Zee Entertainment is expected to rise to 17.9 per cent on a fully diluted basis. This remains below the 23.79 per cent stake covered by the broader warrant issue approved by shareholders.

Zee Entertainment shareholders had approved the issue of 24.94 crore warrants to the promoter group at Rs 126 per warrant, giving the proposed issue a total value of Rs 3,143.52 crore. The resolution received 76.6 per cent of votes polled in favour.

The allotment comes as Zee Entertainment continues to face a regulatory dispute with the Securities and Exchange Board of India (Sebi).

Sebi had barred Zee Entertainment from accessing the securities market for two months, while promoters Subhash Chandra and Punit Goenka were each prohibited from accessing the market for 12 months.

The regulator’s action related to the use of Zee Entertainment’s Hyderabad property as security for Rs 726 crore of borrowings raised for four Essel Group entities. Sebi said the transaction had not received the required approvals from Zee’s board and audit committee. It also cited alleged violations of the Prevention of Fraudulent and Unfair Trade Practices (PFUTP) and Listing Obligations and Disclosure Requirements (LODR) regulations.

The Securities Appellate Tribunal (SAT), however, provided interim relief to Zee Entertainment on August 14 by staying Sebi’s order against the company.

SAT also allowed Zee Entertainment to proceed with the proposed Rs 3,143 crore preferential warrant issue to its promoters, clearing the way for the latest allotment.

The latest fund infusion therefore comes at a crucial point for Zee, giving the company fresh capital while its regulatory battle continues. The market response, however, remained cautious, with the stock trading below the Rs 126 warrant issue price in Monday’s session.