The promoter Goenka family of Zee Entertainment Enterprises Ltd has proposed to invest up to ₹3,143.51 crore in the company through fully convertible warrants issued to promoter entity Sunbright International Holdings Ltd, at a conversion price of ₹126 per share.
Shares of Zee Entertainment settled 4.6% higher at ₹108.31 apiece on the National Stock Exchange on Wednesday.
In a board meeting on Wednesday evening, the promoters have proposed to eventually hike Sunbright International’s shareholding in Zee Entertainment from the current 0.18% to a little over 20%, taking the Subhash Chandra-led Goenka family’s total stake in the company to just under 25%, according to an exchange filing.
The proposed transaction is subject to shareholder approval and the exercise of all allotted warrants by the promoters. Sunbright has 18 months from the date of subscription to exercise all allotted warrants. Sunbright will pay 25% of the warrant issue price upfront at the time of subscription.
A fully convertible warrant gives the subscriber the right, but not the obligation, to buy shares at a set price within a specific period of time.
Last month, the company had said in an exchange filing that it will raise up to ₹2,300 crore in equity funding. Last year, Zee had attempted a similar fundraise of ₹2,200 crores via warrants, proposing to more than quadruple the promoter Goenka family’s 3.99% stake. Prominent foreign shareholders including Morgan Stanley Research’s Calvert Research and Management and the City of New York Group Trust had rejected the proposal.
“The structure of this transaction is the same as the one proposed last year,” Shriram Subramanian, founder and managing director of proxy advisory firm InGovern told Mint. “The promoters are using the same instrument – fully convertible warrants – and are proposing to invest at a lower price of ₹126 per share compared to ₹132 per share last year. Also, it is unclear where the promoters will bring the funds from. Given that Zee Entertainment’s shareholders rejected this structure last year, they will find it even tougher to accept this proposal.”
Zee Entertainment is in need of funds as it signs pricey deals. Last month, it snagged media rights for the FIFA World Cup and other events until 2034 for a reported sum of over $30 million. On Wednesday, it announced it had bought the rights to the German Bundesliga football league for five years for an undisclosed sum. The company is also investing in newer, digital businesses including the microdrama app Bullett and its streaming service Zee5.
In FY26, the company reported a “dismal” set of numbers with a decline in ad revenues and profit margins. Consolidated revenue for the year stood at ₹8,245 crore, down 2%, while profit after tax fell by a massive 60% to ₹271.3 crore on account of higher advertising, promotion and other expenses. Ad revenue fell 10% year on year for the company in FY26.
“Zee Entertainment exited a subdued FY26 on a dismal note… adjusted EBITDA declined 51% YoY due to higher A&P and other expenses. Reported profitability was even weaker due to a change in accounting of the movie rights,” research analyst Aditya Bansal wrote in a note for brokerage firm Motilal Oswal in May this year. “We believe that a sustainable recovery in ad revenue remains the key to any potential re-rating of multiples for Zee.”
“Ad revenue has been weak for a brief period of time, declining for the third straight quarter in Q3FY26 but grew q-o-q,” analysts at brokerage firm Mirae Asset Sharekhan wrote in a note on the company in January this year. “With FMCG ad spending critical for revenue and margin growth, Zee’s near-term goal of 8-10% revenue growth and margins reaching ~18% in FY26 looks unachievable.”
Invesco puzzle
Meanwhile, shares of Zee Entertainment soared nearly 8% in early trade on Wednesday ahead of the board meeting and on the news that the US-based investment management firm Invesco had bought shares in the company worth ₹418 crore in the March quarter. Data from an FDI newsletter published on 15 June by the India’s Department for Promotion of Industry and Internal Trade shows Invesco’s OFI Global China Fund LLC bought the stake. However, Zee Entertainment clarified that no such transaction took place and as of date, the fund does not own any stake in the company.
An email sent to an Invesco spokesperson remained unanswered.
Invesco had first invested in Zee Entertainment in 2002, eventually becoming the company’s largest shareholder with an over 18% stake as of 2021. But the relationship soured when in 2021, the fund issued a requisition notice demanding an extraordinary general meeting for the removal of Punit Goenka as managing director and the appointment of six independent directors to the company’s board. Eventually, Invesco backed Zee’s merger with Sony, which ultimately fell through in early 2024. By 2022, Invesco had sold its entire stake in the company.