Three proxy advisory firms—Stakeholders Empowerment Services, Institutional Investor Advisory Services, and InGovern Research—have warned investors to vote against Zee Entertainment Enterprises Ltd.’s plan to raise Rs 2,237 crore via issue of fully convertible warrants to promotors.
“Given the excessive dilution from the proposed warrants issue and the recent challenges faced by Zee, the increase in promoter holding through issue of warrants may not be in the best interest of the minority shareholders,” InGovern wrote in a voting recommendation. “We recommend shareholders vote against the resolution.”
The proxy firm said that shareholders should seek enhanced disclosures from the Zee board as to how the funds will be utilised, with a project-wise breakdown. It also told investors to ask for details on the source of the funds to fulfill the payment obligations, and check whether the proposal was subjected to an independent review by an audit committee consisting of only independent directors.
Earlier this month, Zee Entertainment’s board had approved plans to raise Rs 2,237 crore via the issue of fully convertible warrants to promotors.
These promoters are Altilis Technologies and Sunbright Mauritius, who currently hold no stake in the firm. Post the allotment of warrants, their shareholding will increase to 15%. This will take the overall promoter holding to 18.39% from 3.99% currently.
The company will issue up to 16.95 crore fully convertible warrants to the promoter group entities on a preferential basis, at Rs 132 per warrant. At the time of announcement, the warrant price was at 4.5% discount to the market price of the scrip.
Zee will receive Rs 560 crore immediately, with the remaining Rs 1,677 crore arriving over the next 18 months.
This move marks the first major investment since the failed Zee-Sony merger.
The funds are earmarked to strengthen Zee’s financial foundation, fortify core business segments, and explore new growth opportunities. This cash injection is also seen as crucial for mitigating potential contingent liabilities, including the ICC rights dispute with Jio-Star, and standing strong against competitors like RIL-Disney.
Highlighting the setbacks from the ICC dispute and the Sony fallout, SES noted that the market sentiment for Zee is not positive in the present scenario.
“Given the past setbacks and performance in the security market of most media companies, a right issue of this magnitude may be a risky proposition,” it said.
SES also raised concerns over how the warrants were priced.
The company, SES said, has priced their warrants using a SEBI mechanism under the Issue of Capital and Disclosure Requirements that is usually used for equity pricing.
“SES does not consider this to be a fair pricing of warrants, as warrants are a different species of instrument, and the impact of 18-month conversion period is not accounted for.”
IiAS has also voted against the regulation citing governance issues and inequitable treatment in favour of the promoter group.
The firm uses the inequitable treatment term for resolutions, which it thinks benefit the controlling shareholders at the expense of the public shareholders. This also includes resolutions which may result in excessive dilution or disproportionate voting powers.
IiAS and SES also recommended voting against the appointment of independent directors Saurav Adhikari and Divya Karani, citing governance issues and regulatory non-compliance.
The board appointed Adhikari and Karani as additional directors on Nov. 29, 2024 and Jan. 23, 2025, respectively. “The company is seeking shareholders’ approval on July 8, 2025 and more than three months have elapsed for both appointments,” SES wrote, highlighting that this violated SEBI regulations for listed firms.
Adhikari and Karani were appointed without prior approval from the Ministry of Information and Broadcasting, which is required for media companies.
The two approvals from the ministry came only in April and May, 2025.
“MIB guidelines require prior approval, whereas these two directors have already assumed their role and have participated in board meetings,” SES said, while also adding that they have also drawn remuneration for their participations.
The voting for approving the fundraise proposal starts on July 6 and closes on July 9, while the voting period for the appointment of Adhikari and Karani opened on June 9 and closes on July 8.
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