Zee Entertainment shares rally 8% after SAT grants interim relief in Sebi order

Synopsis

Zee Entertainment's shares experienced a surge following the Securities Appellate Tribunal's grant of interim relief. The tribunal has put a hold on SEBI's order, permitting promoters to issue preferential warrants. Additionally, ZEEL is allowed to utilize mutual fund units for dividend distribution. However, this relief comes with the condition of paying the penalty that SEBI has imposed, which the company disputes based on claims over property document titles.

Shares of Zee Entertainment Enterprises (ZEEL) rallied as much as 8% to a day’s high of Rs 105 on the BSE on Friday after the Securities Appellate Tribunal (SAT) granted interim relief to the company in its case against the Securities and Exchange Board of India (SEBI).

SAT stayed the SEBI order against Zee Entertainment and permitted the company to go ahead with its proposed Rs 3,143 crore preferential warrant issue to promoters. The tribunal also allowed ZEE to use its mutual fund units for dividend distribution. The relief is subject to the company depositing the penalty imposed by SEBI.

The tribunal had on Wednesday reserved its order on interim relief pleas filed by Zee Entertainment and CEO Punit Goenka against SEBI’s July 31 order, which barred them from accessing the securities market.

The SEBI action stems from title documents related to a Hyderabad property owned by ZEEL. The regulator alleged that the title deeds were provided to Indiabulls Housing Finance as security for loans taken by private entities linked to the promoters without the necessary corporate approvals.

ZEEL has disputed the allegations, saying the documents were taken without authorisation and that there was no direct finding establishing that the company was aware of the arrangement. The company has also argued that it did not itself engage in fraudulent activity in the securities market.

ZEEL had approached SAT seeking permission to complete the proposed Rs 3,143 crore preferential warrant issue, citing a limited window available for the fundraise. The company told the tribunal that shareholders had already approved the issue and that it had received in-principle approval from the stock exchanges. The warrants are proposed to be issued to Sunbright Mauritius Investments, a promoter-group entity.

During the hearing, SAT questioned SEBI’s reasoning for preventing ZEEL from completing the fundraise during the two-month market-access ban, noting that the company could undertake the transaction after the restriction ended.

SEBI argued that allowing the preferential issue while the market-access restriction was in force would dilute the impact of the ban imposed following regulatory violations.

The regulator also opposed Punit Goenka’s participation in the issue, arguing that he is the ultimate beneficial owner of Sunbright Mauritius Investments and is himself subject to a one-year securities-market ban. SEBI said allowing the allotment through the Mauritius-based entity could effectively give Goenka indirect access to the securities market.

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