ZEE shareholders approve ₹3,140cr warrant issue amid SEBI roadblock
What's the story
ZEE Entertainment Enterprises Ltd. (ZEEL) has received shareholder approval for its proposal to issue 24.95 crore fully convertible warrants at ₹126 each. The preferential issue, which is expected to raise ₹3,143.5 crore and boost promoter shareholding to 23.8%, was approved by a special resolution with 76.6% of valid votes in favor and 23.4% against it at an Extraordinary General Meeting (EGM) on July 31.
Regulatory impact
SEBI issued a final order against ZEEL, Goenka, Chandra
Separately, the Securities and Exchange Board of India (SEBI) issued a final order against ZEEL, its MD and CEO Punit Goenka, and promoter Subhash Chandra.
The action was taken in connection with the use of ZEEL's Hyderabad property as collateral for loans taken by four Essel Group entities.
SEBI found that these borrowings were secured without approval from ZEEL's Board and Audit Committee.
Penalties imposed
Monetary penalties imposed by SEBI
SEBI also found that ZEEL, Goenka, and Chandra violated the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations and the SEBI (Listing Obligations and Disclosure Requirements) Regulations.
The regulator has now barred ZEEL from accessing the securities market for two months. Goenka and Chandra have been similarly restrained for a year.
Monetary penalties of ₹30 lakh on ZEEL, ₹58 lakh on Goenka, and ₹60 lakh on Chandra have also been imposed by SEBI.
Expert opinions
Legal experts weigh in on situation
The SEBI order has raised questions about the implementation of the shareholder-approved warrant issue while these directions are still in force.
Advocate HP Ranina said, "At this point in time, they cannot proceed with the issue of warrants."
He further clarified that it can't be assumed that the position would change merely because ZEEL or promoters challenge the order.
Participation restrictions
What does it mean for the warrant issue?
Securities law specialists said SEBI's directions prohibit Goenka and Chandra from participating in the proposed warrant issue during their restraint period.
However, if the shareholder-approved resolution allows participation by other eligible entities not restrained by SEBI, they could participate.
But ZEEL itself has also been barred from accessing the securities market for two months, which would prevent it from implementing the warrant issue during that time.