Zee Media gets nod for promoter stake boost, institutions oppose

Promoters of Zee Media Corp, the company that runs Zee branded news channels, have won shareholder nod to be allocated up to 13.5 cr warrants on shares, overcoming opposition from institutional investors.

It was a month ago that the company’s board decided to put before shareholders a proposal that would see promoter group, the Subhash Chandra family, getting 13.5 cr warrants that can be later converted into shares.

The proposal to issue these warrants — convertible to shares within the next 18 months — won overwhelming support from regular shareholders, but was opposed by the majority of its institutional shareholders, according to the results of the voting.

The warrants, if converted, will substantially raise the stake of the promoters in the company.

At present, promoters hold only around 5.33 cr out of the total 62.54 cr shares outstanding in the company, giving them a stake of only around 8.52%.

A year ago, the promoter group used to hold a stake of 25.85%, but the Subhash Chandra family has lost quite a lot of its shareholding in listed companies after banks and other financial institutions took possession of these shares due to loan defaults.

The proposal to issue the warrants was opposed by 90.53% votes from institutional investors who expressed their preference in the poll. However, institutional investors hold only 8.44% of the total shares of the company.

83% of Zee Media shares are held by non-institutional investors, such as other companies, NRIs, high-net-worth individuals and regular investors. Among the major such investors in Zee Media — as of September end — are HDFC, IDBI Trusteeship Services, L&T Infrastructure Finance Co and L&T Finance.

This class of investors overwhelmingly supported the proposal to issue warrants to the promoters.

In the end, therefore, over 79% of the counted votes were in support of the warrant issue in favor of the promoters, while only 20.8% were in opposition.

The resolution enables the promoters to convert their warrants into shares at the rate of Rs 12.20 per share in the next 18 months.

A warrant is a financial instrument that gives its holder the right to convert it into an equity share at a future date, but at a prefixed price.

Warrants give more flexibility to investors as the investor has to pay only a small part of the share price at the time of warrant issue. Most of the cost is incurred only if and when the warrants are converted into shares.

This gives investors the flexibility to walk away in case the share price of the company fails to pick up and it would be cheaper for them to buy the shares from the market.

Zee Media shares have been traded at around the Rs 12 mark in recent months. They rose 4.9% today to Rs 12.90 in morning trade, hitting the upper circuit.

Another resolution, seeking to settle outstanding financial issues with group company Diligent Media Corp — the former publisher of DNA newspaper — was also passed due to overwhelming support from non-institutional shareholders today.

Like in case of the warrant issue proposal, over 93% of the non-institutional public supported the settlement proposal, while over 90% of the institutional investors opposed the terms of the settlement.