Proxy advisors urge shareholders to block Zee promoters’ Rs 2,237 cr stake hike
SES, InGovern and IiAS collectively have urged against the key proposal that can significantly increase the shareholding of Zee's promoters, who were outvoted by minority shareholders, earlier.
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India’s three leading proxy advisory firms have come together, urging Zee Entertainment shareholders to vote against the promoters’ attempt to significantly increase their stake in the company.
At an Extraordinary General Meeting scheduled for July 10, the board has sought shareholder approval for a preferential issue of 16.95 crore fully convertible warrants worth ₹2,237 crore, which would raise promoter holding from 3.99% to 18.39%.
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 ₹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 have 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.
In June, ZEE had approved the issuance of up to 16.95 crore fully convertible warrants to its promoter group on a preferential basis, priced at ₹132 per warrant, significantly above the SEBI-prescribed price of ₹128.58. The move was aimed at strengthening the company’s financial foundation and accelerating its strategic ambitions in the content and technology space.
The Board met twice on June 16 to deliberate on the company’s future growth roadmap. In the first meeting, investment bank J.P. Morgan India Pvt. Ltd., appointed as a strategic advisor, presented its evaluation of ZEE’s long-term growth initiatives and market positioning. J.P. Morgan’s review included suggestions to augment the company's balance sheet and position it for upcoming opportunities and market shifts.
