Zee Entertainment Allots 20.94 Cr Warrants To Promoter Entity: What It Means

Zee Entertainment Enterprises Ltd (ZEEL) has allotted 20,94,47,805 fully convertible warrants to promoter-group entity Sunbright Mauritius Investments at ₹126 per warrant, according to a Moneycontrol report. The allotment was completed on August 21 after shareholder and stock exchange approvals, along with a favourable order from the Securities Appellate Tribunal (SAT).

The warrants can later be converted into one ZEEL equity share each at ₹126 per share. Sunbright has already paid 25% of the issue price, or ₹31.50 per warrant, amounting to about ₹659.76 crore. The remaining 75% has to be paid within 18 months of allotment.

If all the warrants are converted into shares, Sunbright’s holding in ZEEL would rise to around 17.90% on a fully diluted basis. Until the remaining amount is paid and the warrants are converted, ZEEL’s paid-up share capital will remain unchanged.

What The SAT Order Means For Zee

The warrant allotment follows a recent SAT order that allowed ZEEL to raise funds through preferential warrants issued to its promoter group. The tribunal also allowed the company to use its mutual fund investments for its regular operational expenses.

SAT had also given ZEEL an additional week to complete the preferential allotment process. The permission was subject to the appellants depositing the full penalty within one week.

The tribunal said the company could use its mutual fund investments to meet day-to-day business requirements in the ordinary course. However, the funds cannot be used for other purposes, including payment of the proposed dividend.

Why The Fundraising Matters

Sunbright will have to pay ₹94.50 per warrant, or the remaining 75%, by February 21, 2028. Only after the required payment can the warrants be converted into equity shares.

The fundraising comes amid regulatory scrutiny of ZEEL. A July 31 order by the Securities and Exchange Board of India (SEBI) concerned the alleged unauthorised pledge of a ZEEL-owned land parcel in Hyderabad as security for loans raised by entities linked to the company’s promoters.

According to SEBI’s order, the arrangement allegedly lacked required corporate approvals and disclosures. The regulator said the matter came to light after title deeds relating to ZEEL properties were found missing.