Zee's Latest Mauritian Investor Ultimately Benefits Promoter Punit Goenka

Nearly all of the Rs 2,237 crore that Zee Entertainment Enterprises Ltd. plans to raise via a warrants issue will come from a Mauritius entity whose ultimate beneficiaries include ousted board member Punit Goenka.

Goenka, who is part of the media giant's promoter family, is also named as one of the ultimate beneficiaries of Sunbright Mauritius Investments Ltd. The other beneficiaries include Shreyasi Goenka, Amit Goenka, Navyata Goenka and Sushila Devi Goenka.

Documents show that Sunbright will be subscribing to over 99% of the Rs Rs 2,237-crore warrants issue, which will then be converted to a 14.92% stake in the company upon conversion.

Currently, Zee promoters don't have any board seat.

"The board is now allowing Punit Goenka and the promoter group to be further entrenched in the company by consenting to the family/promoter group increasing its stake," proxy firm IiAS wrote in a voting advisory dated June 30.

Punit Goenka, currently CEO, relinquished his position as managing director of the company in November 2024, and ceased to be a director soon after. This followed the resolution for his re-appointment failing to get the requisite majority from the company's shareholders, with just over 50% of them voting against the resolution.

"The company believes that raising funds from the promoters is a preferred route, given its strategic benefits and the commitment it demonstrates from the promoter group," a spokesperson for Zee said in a statement. "With the promoters increasing their stake to 18.39%, the company will get a long-term investor whose interests are aligned with its strategic growth plans."

The other promoter entity involved in the fundraise, Altilis Technologies Pvt., is also backed by Sushila Goenka. This entity will end up with a mere 0.08% stake post the warrants issue.

Earlier, Zee Entertainment's board had approved plans to raise Rs 2,237 crore via the issue of fully convertible warrants to promoters.

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, Zee has reiterated, are earmarked to strengthen it's financial foundation, fortify core business segments, and explore new growth opportunities.

"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," proxy firm InGovern wrote in a voting recommendation last month. "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.

Zee's chairman emeritus Subhash Chandra, in an interview televised on Thursday, cited that the promoter entities' funds were being raised through dues pending for four to five years, which include dues paid by state governments for infrastructure projects.

"Providing overly specific, public schedules for fund utilisation related to strategic acquisitions and scaling initiatives can compromise our competitive position and strategic flexibility," the company said in a response to another proxy firm IiAS date.

Commenting on the overhang of promoters increasing stake through a warrants issue, Zee said, "The proposed increase in ownership to ~18.4% signals intent to share risk with fellow shareholders."