Brokerages have shown a level of confidence in Zee’s recent warrants issue proposal despite proxy firms forecasting the same investor response as last year.
Zee’s Board of Directors approved issuance of around 24.94 crore fully convertible warrants on Wednesday at a price of ₹126 aggregating to approximately ₹3,143.5 crore on a preferential basis to promoter group entity Sunbright Mauritius Investments.
Zee proposed for about 25 per cent of the issue price or ₹31.5 per warrant to be paid upfront, as per stock exchange filings. This means Zee will get ₹785.9 crore immediately, bringing total cash balance to ₹3,545.4 crore on immediate basis.
At the same time, conversion of all warrants into equity would mean a share dilution of 26 per cent for investors.. Last year, investors turned down a similar proposal of the company to issue warrants worth ₹2,237.4 crore to promoters. Yet, analysts have voiced optimism in Zee’s approval this time around.
“Promoters currently own 4 per cent in Zee. Once all the warrants get converted into equity, promoter holding will rise to 23.8 per cent (promoter shareholding calculated on post-issue capital base). Increasing skin in the game can be a big confidence booster to the market,” said Jinesh Joshi, Vice President, Research Associate, Institutional Research – PL Capital in a research note.
The funds raised from the proposal could go towards acquiring further sports properties after acquiring FIFA and German football league Bundesliga. It could also expand its micro-drama format or invest in the OTT platform Zee, as per the brokerage. Noting that Zee managed on 60 per cent of the votes in favour of the proposal in 2025, as against the required super majority of 75 per cent, Joshi said, “It would be interesting to see, if the shareholder approval is achieved this time.”
Similarly, Nuvama Institutional Equities also voiced confidence in Zee’s second attempt at preferential allotment of warrants when speaking to media.
However, proxy firms think otherwise. InGovern Research still forecasts the proposal to meet the same fate as last year. With Zee’s overall structure largely unchanged, investor reservations on warrants issue to promoter groups remain unaddressed, said Shriram Subramanian, Founder, InGovern.
“Investors will not agree to the 25 per cent upfront payment of the issue price. This is a failed exercise,” said Subramanian.
Similarly, IiAS maintained its reservations on promoter group gettings warrants. It asked the government to explain what has changed since last year and the extent of dilution.
“IiAS is generally not in favour of preferential issue of warrants to promoters because of the risk of forfeiture. IiAS does not encourage warrants to promoters and rather all the money be brought-in upfront,” said IiAS in its voting guidelines to investors.
Earlier while speaking to media, Hetal Dalal had asked Zee to explain why it needs to raise the capital and dilute investor shares while sitting on cash. The strategic flexibility argument will fall short in convincing investors on this front, she said.