Zee Entertainment Ltd. has addressed pressing concerns raised by investors, providing clarity on its recent strategic decisions, particularly regarding the preferential issue and funding choices.
This comes after three proxy advisory firms—Stakeholders Empowerment Services, Institutional Investor Advisory Services, and InGovern Research—warned investors to vote against Zee's Rs 2,237-crore fundraise plan.
The firm was planning to raise these funds via issue of fully convertible warrants to promotors. This was the first time Zee planned to infuse money into the firm after 18 months.
However, InGovern Research had said that shareholders should seek enhanced disclosures from the Zee board as to how the funds will be utilised, with a project-wise breakdown.
The company's board has directly tackled four key areas of investor apprehension.
Promoters' Access To Insider Information Dispelled
A significant concern revolved around the potential for promoters to access insider information due to an extended 18-month exercise window for the preferential issue. Management has clarified that promoters will not delay the infusion of funds, committing to inject the money "as soon as possible" to alleviate these worries.
Rationale Behind Raising Further Funds
Despite a healthy cash balance of Rs 2,400 crore, investors questioned the necessity of raising additional capital. Zee's management explained that while the balance sheet is robust, the company aims to further strengthen its financial position to compete effectively against "strong peers" in the industry, emphasising a proactive approach to financial resilience.
Warrants Preferred Over Other Funding Avenues
The choice of warrants over alternative funding sources like rights issues or qualified institutional placements also drew scrutiny. The company elucidated that rights issues typically come at a discount, which Zee wished to avoid to prevent a share price reset. Furthermore, the company expressed uncertainty regarding QIP participation amid "noises" surrounding the company and noted a general downturn in private equity interest within the sector. Prioritising promoter preferences was also highlighted due to their "inherent business expertise."
Ensuring Safety Of Shareholders' Funds
Finally, the safety and transparent utilisation of shareholder funds were paramount concerns. Zee assured investors of full transparency, committing to keeping them informed on all events related to fund usage. Crucially, a SEBI-registered monitoring agency will oversee the deployment of these funds, providing an additional layer of security and accountability.
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