Promoters of Zee Entertainment may tap into recoveries from creditors as it builds its war chest for the Rs 2,237-crore fund infusion into the firm, sector analysts said.
On Monday, Zee’s promoters said they were raising their stake to 18.39% from nearly 4% in the company as they sought to accelerate the firm’s growth plans. The promoters would subscribe to a preferential issue of nearly 170 million fully-convertible warrants at Rs 132 apiece, the media company said, as part of the fund infusion plan that was recommended by investment banker JP Morgan.
Zee chairman R Gopalan said the fund infusion would ensure the promoters’ long-term commitment and motivation in the company.
On Tuesday, brokerage Motilal Oswal said Zee’s parent Essel group, which is led by Subhash Chandra, also the founder of Zee, had made recoveries to the tune of Rs 600 crore from the Maharashtra government, while another tranche of Rs 1,800 crore would be recovered in the next 12-18 months from allied state governments and public sector units.
“While the intended use of funds has not been disclosed yet, capital allocation will remain a key monitorable,” Gautam Duggad, head of research and director, institutional equities at Motilal Oswal, said.
While Zee’s promoters did not specifically disclose how they proposed to fund the preferential issue, the media company will receive around 25% of the fund infusion (Rs 560 crore) upfront, brokerage Elara Capital said. The balance would be staggered over 18 months, it added.
“The conversion window is 18 months from the date of allotment and warrants not exercised within this period lapse and the upfront payment will be forfeited,” Karan Taurani, executive vice-president at Elara Capital, said.
The fund infusion, proxy advisory firms said, would strengthen Zee’s balance sheet, which has Rs 2,406 crore in cash, bank and current investments.
“This strategic move is indicative of Zee’s commitment to investing in new growth avenues and capitalising on emerging opportunities,” analysts at brokerage Nuvama Institutional Equities, said.
The allotment will be directed towards two promoter group entities, namely, Altilis Technologies and Sunbright Mauritius Investments.
“This capital raise aligns with Zee’s ambition to evolve into a content and technology major. The funds are intended not only to fortify the core business but also to explore value-accretive opportunities,” Nuvama said.
The company, which is listed on the stock exchanges, closed FY25 with a revenue of Rs 8,294 crore and net profit of nearly Rs 680 crore. While revenue was down 4% amid tightening of ad budgets by advertisers, net profit rose fourfold as the company pruned costs and workforce in a bid to improve earnings.
In the last few quarters, the company has increased its focus on improving margins and giving a push to content and technology initiatives after it failed to merge with Sony (in 2024) amid consolidation in the domestic media market.