Zee fails to secure shareholder nod for promoter warrant issue, raising questions over funding strategy

In a significant setback for Zee Entertainment Enterprises Ltd (ZEEL), the company’s proposal to issue 16.95 crore convertible warrants to promoter group entities has failed to receive the required shareholder approval, despite securing nearly 60% votes in favour. The motion fell short of the 75% threshold needed to pass a special resolution under regulatory norms.

The warrants were proposed to be allotted to Sunbright Mauritius Investments and Altilis Technologies, two promoter-linked entities. As per the plan, each warrant would convert into one equity share of face value Rs 1, priced at Rs 132, with 25% payable upfront and the balance due at the time of conversion within 18 months.

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Had the resolution passed, the promoter group’s stake in Zee would have risen from 3.99% to 18.39%, significantly strengthening their control over the media company. Zee had earlier stated that the proceeds from the issue — totalling over Rs 2,239 crore — would be deployed towards building new businesses, including a short-form video app, kids’ edutainment content, and sports IP, while also exploring strategic content-tech acquisitions and supporting general corporate purposes.

The EGM was conducted via video conferencing on July 10, 2025 and saw the participation of directors, auditors, management, and over 120 shareholders.

In an official statement following the voting results, a Zee spokesperson acknowledged the outcome and thanked the shareholders who supported the proposal.

“The Board and the management... respect the decision taken by the remaining shareholders,” the company said, while reaffirming its commitment to building long-term value. It added that a “sufficient war chest” remains critical to navigating rapid market shifts and fierce competition.

“The Board and the management of the Company have noted that ~ 60% of the shareholders who participated in the voting process, have expressed their support towards the resolution pertaining to the issuance of fully convertible warrants to promoter group entities, and are grateful for their support.

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Maximizing and safeguarding shareholder value has always been a core area of focus for us. Under the guidance of the Board, the Company has taken significant efforts to enhance the performance and profitability levels in key areas such as improving the margin profile and reducing losses in the digital segment. The Company continues to progress swiftly towards realizing its ambitions by leveraging its cash reserves, prudent approach and entrepreneurial spirit. While the efforts being taken have augured well for the Company, in order to further safeguard it from a future growth perspective, it is important to keep a sufficient war chest available in order to consistently build a strong foundation to address the rapid market shifts and outperform the fierce competition. The Company remains guided by a highly experienced Board to further fortify itself for any unforeseen events as well as to deliver growth and invest in technology and innovation", it added.

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The failed vote puts Zee’s near-term funding plans in flux, especially as the company seeks to sharpen its digital offerings, reduce losses, and compete more aggressively in the content and streaming space.

Last month, Stakeholders Empowerment Services (SES), InGovern, and Institutional Investor Advisory Services (IiAS) collectively contend that the proposal is unjustified and detrimental to minority shareholders. Despite Zee Entertainment holding Rs 2,410 crore in cash and investments, the board “has failed to present any convincing rationale for further fundraising,” they noted. The dilution of nearly 15% for non-promoter investors looms large and has gone unexplained, with no detailed business plan, return-on-investment projections, or clarity on fund usage .

“Given the excessive dilution from the proposed warrants issue and the recent challenges faced by Zee Entertainment Enterprises Ltd, the above increase in promoter holding through issue of warrants may not be in the best interest of the minority shareholders. We recommend shareholders vote “Against” the resolution,” InGovern Research noted in its voting recommendation report.

The pricing mechanism also drew criticism. Priced at ₹132 each, just above SEBI’s mandated floor, the warrants, convertible within 18 months, could allow promoters to acquire shares at a steep discount if market rates rise. Proxy advisors had urged Zee to consider more equitable options, such as a rights issue or qualified institutional placement, suggesting these alternatives would have been more transparent and fair to existing shareholders.