Zee promoters face another shareholder backlash: Proposal to subscribe to warrants defeated 60:40

Punit Goenka's appointment to the board was also defeated by shareholders last year.

Zee promoters have received second jolt from shareholders as Shareholders of Zee Entertainment on Wednesday rejected the proposed fresh capital infusion of Rs 2,237 crore by its promoters through subscription to preferential warrants with 40% of the shareholders voting against the resolution, according to a disclosure made by the company to stock exchanges. While a normal resolution needs only more than 50% support, special resolution needs 75% plus shareholder vote. Current proposal was a special resolution.

In December 2024, shareholders had rejected the appointment of Punit Goenka, who is a promoter of the company, to the position of managing director.

“In view of the above scrutiny as the number of votes cast in favour of the resolution was not more than three times of the number of votes cast against, I hereby certify that the Special Resolution with regard to resolution no. 1 has not been passed with requisite majority.” Said the scrutinizer officer for the voting as disclosed to stock exchanges.

The proposal received retail support as nearly 80% of individual investors voted in favor of the resolution, while only 20% opposed. The development is important since retail investors own more than 40% in the company.

On the other hand, institutional investors were less welcoming about promoters increasing their stake in company as 52% institutions voted against the proposal, while 48% voted in favour tilting the fate of the resolution.

“The Board and the management of the Company have noted that ~ 60% of the shareholders who participated in the voting process, have expressed their support towards the resolution pertaining to the issuance of fully convertible warrants to promoter group entities, and are grateful for their support. The Board and the management also respect the decision taken by the remaining shareholders," a company spokesperson said.

“The Company continues to progress swiftly towards realizing its ambitions by leveraging its cash reserves, prudent approach and entrepreneurial spirit,” it added.

The opposition from institutional investors comes as domestic proxy advisory firms gave a call to shareholders to vote against the resolution. However, foreign proxy firms did not take a similar call.

Promoter Subhash Chandra had held a 90 minute call with the investors on July 3 where he explained to analysts and investors the company’s strategy going forward.

“No, we are not taking any loans, nor are we pledging any shares. The funds being utilised are our own — they are recoveries from promoter-linked entities, which have come back to us,” Chandra told analysts and shareholders.

Justifying the rationale behind using the warrants route to bring funds into the company, Chandra pointed out that while the promoter group has some limited cash reserves available immediately, they are expecting the remaining funds shortly.