Promoters of Zee Entertainment have proposed to increase their stake in the company to 18.39 percent from the current 4.2 percent. This stake rise will be done through subscription to preferential warrants and will fetch Zee Rs 2,237 crore. The development assumes significance as there has been friction between the promoters and investors of Zee Entertainment ever since the Zee-Sony deal failed in 2023-24.
Moneycontrol explains what the proposed increase in promoter stake means for Zee.
What are the biggest risk for company and promoters of Zee?
The proposed preferential issue is subject to shareholder approval and is expected to be put up for shareholding voting in an extraordinary General Meeting on July 10. The shareholders in the past have voted against several promoter group related issues including appointment of Punit Goenka as the managing director of the company. If the proposal fails to garner public shareholder support, it could lead to a situation where promoters are pitted against the larger shareholders. However, the shareholding increase to 18.39 percent as such won’t give any special powers to the promoter group such as control for which initially shareholding has to breach 25 percent mark.
What changes could the preferential issue bring?
To begin with, the increased shareholding of promoter group would help them consolidate their position within the company. Unlike previous shareholder resolutions where promoters had little say due to low shareholding, going forward the promoter group will have more power in voting. The company would get access to the Rs 2,237 crore which could be used for any corporate purposes. However, some institutions along with a section of retail investors have been critics of Punit Goenka’s leadership in the past. It remains to be seen as to how these shareholders would respond to promoter group’s plans.
Can Punit Goenka be back as managing director?
On December 10,2024, the shareholders of Zee rejected appointment of Punit Goenka as board member and director of the company. Goenka has lost the voting with a margin of just 0.5 percent, with 50.5 percent shareholders voting against the proposal. With the shareholding of promoters reaching 18.39 percent mark would improve the prospects of reappointment of Goenka as MD. Independent directors whose candidature is defeated by shareholder voting is not eligible to reapply for the position for a period of two years. However, for promoters and full time directors, there is no such cooling off period.
Who are promoters of Zee?
Subhash Chandra is the founder of Zee, while his son Punit Goenka is the chief executive officer (CEO) of the company. Promoters don’t directly own shares of Zee, instead they own it through seven entities, including Essel Corporate LLP and Essel Media Ventures Limited.
Who are the Zee shareholders?
Zee is a widely owned stock with ownership across foreign, domestic and retail investors. Indian mutual funds including Aditya Birla MF,ICICI Prudential and HDFC Mutual Fund own 9.49 percent stake in the company. Foreign institutions, including Vanguard, own nearly 23 percent. There are also 6.8 lakh individual investors in the company who put together own nearly 40 percent in the company, shareholding pattern showed.
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