JM Financial is positive on ZEE Entertainment Enterprises Ltd (ZEE) prospects, especially after promoters opted for a preferential warrant issuance over other forms of fund raising, prioritising value preservation and execution velocity. Ahead of July 10 shareholder voting on promoters’ fund infusion, JM Financial said rights issues, while inclusive, would have necessitated a discount, potentially resetting the stock’s benchmark at a trough.
“Instead, the proposed infusion – at a premium to CMP – not only shores up the balance sheet but brings in aligned long-term partners with skin in the game. With 25 per cent upfront capital committed and the remainder to be brought in swiftly, this move is positioned as a bridge to ZEE’s growth,” JM said.
This is in contrast with InGovern Research, which reportedly suggested that the excessive dilution from the proposed warrants issue and increase in promoter holding may not be in the best interest of the minority shareholders. The proxy advisory firm recommended shareholders to vote ‘against’ the resolution.
PL Capital on Friday cut its FY27 EPS estimates by 4 per cent, as it accounted for dilution impact resulting from issuance of fully convertible warrants to entities forming part of the promoter group.
“We expect a modest 7.5 per cent revenue CAGR over the next 2 years on a low base of FY25 with 540bps expansion in Ebitda margin given plans to achieve break-even in the digital business. Retain BUY on the stock with a target of Rs 179 (earlier Rs137) as we increase our target multiple to 15x (earlier 11x; refer exhibit 4 for past trading history on Z IN) as preferential allotment to promoters lowers the execution risk challenges,” PL Capital said.
JM Financial retained its ‘Buy’ rating and target price of Rs 210 per cent for the stock, hinting at 45 per cent upside ahead. On Friday, the scrip was trading 2 per cent higher at Rs 146.80. The stock is up 15 per cent in the past two weeks.
The domestic brokerage, which attended “Ask me anything” webinar by ZEE for investors, said the board remains clear that ZEE cannot afford to wait 6-7 years for the capital they raised through FCCBs.JM Financial said the ZEE management addressed concerns around the structure of the proposed warrants, emphasising its premium pricing,
non-dilutive stance, and alignment with long-term shareholder value creation.
To recall, ZEE’s board on May 16 approved issue of 16.95 crore fully convertible warrants at Rs 132 per share on a preferential basis to Altilis Technologies Pvt. ltd and Sunbright Mauritius investments ltd, both of which are promoter group entities.
The warrants were structured with a 25 epr cent upfront payment (Rs 33 per share) and the warrant exercise price stands at Rs 99 per share (75 per cent of total). The maximum period for exercise was set at 18 months.
This Rs 2,237.40 crore fund infusion would increase promoter’s stake in the company from 3.99 per cent to 18.39 per cent.
The price for issue of warrant as per SEBI guidelines came in at Rs 128.58 per warrant, the promoters agreed to pay premium of Rs 3.42 per warrant. The issue is, however, subject to shareholder’s approval at an EGM to be held on July 10.
Chairman R Gopalan noted that after extensive discussions with JPMorgan the board concluded that increased promoter investment would align their commitment with the company’s long term objectives.
“Shubham Shree, commenting on behalf of the promoter group highlighted that the promoters had submitted their intent to raise stake to the board
on 1st May 2025 when the stock was at Rs 106 and added that the promoters are committed to the company and its business even at the current price of the warrant issue,” JM noted.
The session highlighted ZEEL’s five-pronged business model – Linear, Digital, Music, Studios, and Syndication – with a unified IP-driven content strategy across platforms.
“Promoters’ stake raise aligns their interest more closely with minority shareholders’. That increases their incentive to unlock value, as proposed, through music and syndication – a win-win for all,” JM Financial said.
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