Zee founder Subhash Chandra’s recent comments that the promoters plan to raise their stake initially by an additional 5% and eventually to 26% seems to have attracted the market regulator, the Securities and Exchange Board of India’s (Sebi) scrutiny.
According to a report by Moneycontrol, Sebi is examining whether the statements breach the regulator’s disclosure norms that mandates that material events should be disclosed be shareholders first.
On Monday, Chandra said in an interview that the promoters are working towards raising their stake from the current 4% by another 5% soon and eventually by 26%. However, he added that the company does not plan to take any more debt to increase promoter stake, and would prefer to tap family members for the same.
According to the report, the market regulator is examining whether these statements violate the disclosure norms and insider trading code, such as price manipulation.
On Tuesday, Zee Entertainment’s share price closed at 171.20, up 5.84%. Sebi existing rules mandate that listed companies disclose any material events to shareholders first through stock exchange platforms. Also, in developments such as hike in stake by promoters, the company needs to make the proposal to the board first and then to the investors.
Currently, Chandra does not have any executive role in ZEE and is designated as Chairman Emeritus. His son, Punit Goenka, is the MD and CEO of the company. “If promoters are indeed increasing their stakes, it needs to be verified if the decision was made after all due procedures. It also needs to be ascertained if any of the insiders were privy to the news and whether there is a funding plan in place,” said a person cited in the report.
Chandra’s statements came in the wake of the breakdown of negotiations between Zee Entertainment and Sony Pictures. Legal experts say while it is not uncommon for promoters to state their intent to increase or decrease shareholding in a company, unsubstantiated statements could potentially mislead shareholders.
The Zee promoter group is already facing several regulatory proceedings from Sebi for alleged violation of market rules. In an interim order dated August 14, Sebi barred Chandra and his son Goenka from holding directorship in any listed companies. This order was later overturned by the Securities Appellate Tribunal (SAT), which reinstated them.