SES reverses stance, backs Zee’s ₹2,240 cr warrant issue; promoters to raise stake

Brokerages PL Capital and JM Financial also supported the move, citing strengthened finances and accelerated growth plans, including expansion in edutainment, live content, sports IPs, and 3D R&D. 
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DADO RUVIC/Reuters

Proxy advisory firm SES, has changed its earlier stance and voted in favour of Zee Entertainment’s resolution to issue convertible warrants to the Promoter Group “after considering the circumstances of the proposed Issue of Warrants.”

SES’ changed stance followed a mail from Zee that said the proxy firm’s concerns are based on “theoretical models” that don’t fully reflect the practical realities of the company.

SES had argued that pricing of Warrants should differ from that of equity and should be based on a Black- Scholes model. It also raised concerns about the premium being too low.

However, the pricing decision becomes particularly significant when viewed against the backdrop of the company’s recent stock performance, said Zee.

“While the warrant price computed as per the regulatory formula was ₹128.58, the Promoters voluntarily chose to invest at ₹132, paying a premium of ₹3.42 per warrant. The company’s shares had touched their 52-week low of ₹90 on March 3,” said the company in its letter, adding that even during the proposal meeting on May 1, the stock was trading at ₹106.

Regarding the SES suggestion for an alternative valuation model, Zee said it was not required here and could introduce unnecessary subjectivity.

“Our approach reflects the current market value and provides a predictable, fair price. Regarding future value, the current pricing captures the fair value at the relevant date. Importantly, the company receives an immediate 25 per cent upfront payment (₹33 per warrant), which injects much-needed capital for growth and operations now, regardless of future market trends,” said Zee.

A key advantage of the warrant share is the upfront payment, aligns promoter interests with long-term growth, and reduces reliance on external funding.

“Keeping in mind that ZEE has had past negative issues, and that the Issue is at a premium to the Undisturbed Price, SES is revising its recommendation,” said SES.

Capital raise to boost digital and M&A plans

Brokerage firms also reported positively for ZEE ahead of the extraordinary general meeting on July 10. PL Capital stated that the issuance of approximately 169.5 million fully convertible warrants at ₹132 each to promoters would result in a preferential inflow of around ₹2,240 crore.

“Each warrant will be converted into one equity share resulting in a dilution of 17.6 per cent. However, as the funds will be initially deployed into treasury, the net dilution impact is likely to be lower,” said the brokerage, stating that post-warrant conversion, the promoter stake will rise from 4 per cent to 18 per cent.

These preferential proceeds will be deployed to launch a short-form content app, create edutainment content for children, develop and license sports content properties, expand the live content business, enhance distribution capabilities, and invest in R&D for 3D content delivery. Further, the company will earmark ₹7.1 billion for mergers and acquisitions.

Brokerages see long-term growth

Meanwhile, JM Financial stated that the proposed infusion – at a premium to CMP – shores up the balance sheet and brings in long-term partners with skin in the game.

“With 25% upfront capital committed and the remainder to be brought in swiftly, this move is positioned as a bridge to Zee’s growth. The Board remains clear that Zee cannot afford to wait 6-7 years for the capital they raised through FCCBs,” said the report.

Published on July 5, 2025