Motilal Oswal's research report on Zee Entertainment
Zee’s Board of Directors has approved the issuance of up to 169.5m fully convertible warrants to promoter group entities on a preferential basis at INR132 per warrant (~2.6% premium to the SEBI floor price). The issuance of warrants is subject to shareholders’ approval and will result in a capital infusion of ~INR22.4b, increasing the promoter shareholding to 18.39% (from ~4% currently), upon full conversion of the warrants. While the intended use of funds has not been disclosed yet, capital allocation will remain a key monitorable. At the outset, we view the promoters’ move to raise their stake in the company as a positive development. Our earnings remain unchanged as we await further clarity on usage of funds.
Outlook
We remain Neutral on Zee with revised TP to INR150 (earlier INR125), premised on 14x FY27E PE (vs. 12x earlier) as we await sustained revival in ad revenue and favorable outcome in ICC rights arbitration with Star.
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