Zee gains depend on advertising revenue recovery, fund usage

The board of directors of Zee Entertainment Enterprises (Zee) approved the issuance of up to 169.5 million fully convertible warrants to promoter entities — Altilis Technologies and Sunbright Mauritius.

- DEVANGSHU DATTA

These are convertible within 18 months of allotment at ₹132/warrant (2.6 per cent premium to the Sebi floor price).

While 25 per cent of the warrant price is to be paid upfront, the balance 75 per cent is to be paid on conversion. This issue is subject to shareholders' approval on July 10. On full conversion, the warrants will increase equity by 17 per cent and thus dilute earnings per share or EPS, if fund deployment doesn't yield satisfactory returns.

Assuming approval, it will result in a capital infusion of ₹2,240 crore, increasing promoter shareholding to 18.39 per cent (from 4 per cent), on full conversion. The use of funds has not been disclosed yet.

This is a key monitorable, although the hike of promoters' stake is positive. Other key monitorables are revival in advertising revenue and a favourable outcome in ICC rights arbitration with Star.