Zee Entertainment Enterprises Ltd. shares fell sharply on Monday after the Securities and Exchange Board of India (SEBI) barred the company and its promoters from accessing the securities market, renewing concerns over the company's corporate governance.
The stock declined as much as 11.52% to an intraday low of Rs 102.15 on the BSE. At 9:20 am, it was trading 8.66% lower at Rs 105.45, underperforming the broader market, with the BSE Sensex up 0.67% at 78,616.
SEBI Order Revives Governance Concerns
The market regulator has barred Zee Entertainment from accessing the securities market for two months and imposed a Rs 30 lakh penalty.
Managing Director and CEO Punit Goenka and founder-chairman emeritus Subhash Chandra have each been debarred from the securities market for 12 months and fined Rs 58 lakh and Rs 60 lakh, respectively.
The action stems from SEBI's findings that a fixed deposit linked to the company's Hyderabad property was created without board or shareholder approval to secure loans for Essel Group entities, violating corporate governance and securities regulations.
Zee said it is evaluating the contents and implications of the order and exploring the legal options available.
Promoter Fundraise Offers Long-Term Support
The regulatory action comes even as shareholders approved the issuance of 24.95 crore warrants to the promoter group at Rs 126 per warrant, enabling a capital infusion of Rs 3,143 crore.
Once completed, promoter shareholding will rise to 23.79% from around 4%, a move that had been closely watched by the Street.
Kotak Securities Turns Bullish Despite Overhang
Domestic brokerage Kotak Securities upgraded Zee Entertainment to 'Add' from 'Reduce' and raised its target price to Rs 130 from Rs 90, saying the promoter capital infusion sets the stage for potential value unlocking.
The brokerage, however, cautioned that headwinds in the company's core broadcasting business are unlikely to ease anytime soon.
It added that the music business could emerge as a key near- to medium-term catalyst, while the increased promoter stake should improve investor confidence over time.
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