SAT grants Zee interim relief, allows ₹3,143 crore preferential issue

The tribunal permitted Zee and Punit Goenka to complete the preferential warrant issue subject to payment of penalties, but the Sebi-imposed market debarment will continue

The Securities Appellate Tribunal (SAT) on Friday granted interim relief to media firm Zee Entertainment Enterprises (Zee), permitting it to go ahead with the issuance of ₹3,143-crore preferential warrants.

 

Zee and its chief executive officer (CEO) Punit Goenka had approached the tribunal against the July 31 Securities and Exchange Board of India (Sebi) order, which restrained them from the securities market.

 

“Appellant company and Goenka are permitted to complete the process of issue of fully-convertible warrants to the promoter group entity on a preferential basis, subject to deposit of full penalty within one week by both the appellants. Sebi shall place such deposits in an interest bearing account,” the tribunal said in the order.

 

The time for completing the preferential issuance has been extended by one week. The prior 15-day window was expiring on Friday (August 14).

 

However, the debarment from the securities market mentioned in the Sebi order will continue.

 

The market regulator, in its order dated July 31, barred Goenka for 12 months, while Zee was restrained from accessing the securities market for two months. Sebi had also imposed a penalty of ₹58 lakh on Goenka and ₹30 lakh on Zee.

 

Meanwhile, promoter Subhash Chandra has also been barred for 12 months along with a penalty of ₹60 lakh.

 

The matter pertains to the use of Zee’s certain land asset in Hyderabad as security for loans availed by four entities of the Essel group. The entities had availed four separate loans aggregating ₹726 crore from Indiabulls Housing Finance Ltd (IHFL). 

 

The regulator had alleged that the benefit arising from the deployment of Zee’s property flowed to entities allegedly controlled by Goenka and Chandra, and their family members.

 

It further added that no prior approval was taken from the audit committee, the board of directors or the shareholders of Zee.

 

While challenging the Sebi order, Zee had sought permission to proceed with its proposed ₹3,143-crore preferential warrant issue.

 

“Sebi’s stand that the proposed investment is permissible after two months after expiry of the debarment period defeats logic. We say so because, except the direction contained in the impugned order, no other legal bar is pointed out. Admittedly, the investment proposal has been approved by 76.64 per cent public shareholders and about 96 per cent of the shareholders are public shareholders,” the Bench stated.

 

On July 31, shareholders approved the fundraise at Zee's extraordinary general meeting (EGM).

 

The tribunal pointed out that with the allotment of warrants, the company is likely to get investments — which will be beneficial to the public shareholders.

 

The preferential warrants are to be issued to promoter group company Sunbright Mauritius Investments.

 

The company had argued that the shares of the company had fallen since the order in July, and if interim relief is not granted, the share price may fall further, impacting the capital-raise plan.

 

The company had also sought relief in accessing its mutual fund units for day-to-day purposes and dividend distribution in September, in its annual general meeting (AGM).

 

“Appellant company is permitted transactions of mutual funds for day-to-day requirements in the ordinary course of business and not for any other purpose (including payment of proposed dividend),” states the order.  

 

The shares of Zee rose as high as 8 per cent following the interim relief, settling at ₹102.2 apiece, ending 5.5 per cent up.

 

Among the constituents in Nifty Media index, Saregama India and Nazara Technologies have rallied the most year-to-date (YTD), rising by 50 per cent and 30 per cent, respectively. Zee Entertainment has risen nearly 13.8 per cent YTD while Network18 Media & Investments and DB Corp saw the sharpest fall at 33 per cent and 19 per cent, respectively.

 

In July 2024, Zee said it is raising $239 million via foreign currency convertible bonds (FCCB) from Resonance Opportunities Fund, St. John’s Wood Fund, and Ebisu Global Opportunities Fund.

 

However, it did not complete the entire fundraise. In April this year, it cancelled $215.1 million in unutilised FCCBs after it received letters from bondholders for reasons including current geopolitical situation and consequent capital allocation strategy, it said in its stock exchange filing. 

 

In 2025, the company tried to raise ₹2,237 crore via warrant issuance to promoters which was rejected by shareholders. 

 

An analyst said SAT's order gives the company significant relief and will bode well for the stock in the near term.