Zee Entertainment shares fall over 3% after promoter stake hike rebuff

Zee Entertainment shares fell 3.1% after shareholders rejected a proposal to increase the promoter family's stake. The company's fundraise plan via convertible warrants also failed to secure approval

A day after shareholders voted against a proposal to increase the promoter family’s stake, shares of Zee Entertainment Enterprises fell 3.1 per cent on Friday.

 

The stock closed at ₹137 a share as investors reacted to the company’s failure to secure shareholder approval at Thursday’s extraordinary general meeting (EGM) for a ₹2,200 crore fundraise via preferential allotment of convertible warrants.

 

A source close to the development said the company will not face any negative impact as it has enough cash to meet immediate requirements.

 

“...No (impact) in the near future because we have enough cash in hand right now,” said a source, who did not wish to be quoted.

 

The company has cash and cash equivalents of ₹2,406 crore in the financial year 2025 (FY25), according to its investor presentation.

 

The board of the company had earlier proposed that founder Subhash Chandra and his family increase stake to 18.39 per cent in 18 months from the current 3.99 per cent.

 

In June, the board of directors of ZEEL had approved 169,503,400 fully convertible warrants at ₹132 per warrant to the promoter group entities on a preferential basis. These warrants were proposed to be allotted to promoter group entities Altilis Technologies and Sunbright Mauritius Investments. 

 

“It is understandable that promoters want to increase their shareholding. However, the instrument chosen was inappropriate as 75 per cent of the funds are coming in only after 18 months and the source of funds is unclear,” Shriram Subramanian, founder and managing director (MD), InGovern Research, a proxy advisory firm, told Business Standard.

 

“Given the track record and ongoing Sebi investigation, institutional shareholders were uncomfortable with the uncertainty.

 

Earlier, another source close to the promoter family had said that Subhash Chandra and his family, through the Essel Group, are expected to recover around ₹1,300 crore in one year from various parties who owed money to them.

 

Subramanian emphasised that with the company already having ₹2,406 crore as cash and cash equivalents, the end use of the additional funds was not clear.

 

He added that the trust between the shareholders and the promoters and the institutional shareholders is very low and has to be regained over a period of time via creeping acquisition.

 

This follows one of the largest shareholders of the company, Norges Bank Investment Management, which manages the Norwegian Government Pension Fund Global, stating on its website on Monday that it will vote in favour of the company’s issuance of fully convertible warrants to the promoter group entities on a preferential basis.