Zee Ent Promoters to Raise Stake to 18.4% with Rs 2,237 Crore Infusion; Shares Gain 3.5%

Zee Entertainment Enterprises’ promoters have decided to infuse ₹2,237.44 crore in the company via subscribing to fully convertible warrants. The board has agreed to issue 169.50mn fully convertible warrants to promoter group entities on a preferential basis, at ₹132 per warrant. The stock had a positive start on June 17 as it climbed as much as 3.5% to its intraday high level of ₹142.75 on the National Stock Exchange.

Although the price as per the prescribed SEBI guidelines comes to ₹128.58 per warrant, the promoters have agreed to pay higher price on board’s insistence. Post-transaction, the shareholding of the promoter entities will rise to 18.4% from over 4%.

“The investment by the promoters, coupled with the strong, ambitious growth initiatives planned by the management team, will ensure that ‘Z’ remains well-positioned to accelerate its strategic plans to achieve its targeted aspirations,” R Gopalan, Chairman, ZEE Entertainment Enterprises, said.

“The infusion of funds from the promoters will enable the company to further fortify its core business segments and strengthen its financial foundation to explore value-accretive growth opportunities in the evolving Media & Entertainment landscape,” the company said in an exchange filing.

In its board meeting on May 1, the company’s board of directors had approved to incorporate three wholly owned subsidiaries to diversify and expand its current business operations.

While the intended use of funds has not been disclosed yet, the promoters’ move to raise their stake in the company can be seen as a positive development, Motilal Oswal said in its report. The brokerage maintained its ‘neutral’ rating on the stock, while raising its target price by 20% ₹150.

Motilal Oswal has kept its earnings estimates for the company unchanged as more clarity on the use of infused funds is awaited. “However, the fund infusion will provide Zee with enough firepower to improve its competitive position in the industry,” the brokerage said.

Kotak Institutional Equities also noted that it awaits further clarity on the usage of the capital. It has kept its 'reduce' call intact, with a price target of ₹127 apiece.