Glass Lewis backs Zee’s warrant proposal, recommends shareholders vote ‘For’

New Delhi: US-based proxy advisor, Glass Lewis, on Monday, gave Zee Entertainment’s proposal a green light and asked shareholders to vote ‘For’ the issuance of convertible warrants. The report published by the proxy advisor comes days before the July 10 EGM to be conducted between Zee and its shareholders. 

The Zee proposal seeks shareholder approval for issuing warrants worth Rs 2,237 crore to the Subhash Chandra-led promoter group, which would increase its stake from 3.99% to 18.39% in a company where over 96% of shares are currently held by public and institutional investors.

In its analysis, Glass Lewis stated that such a requirement will protect the interests of shareholders by ensuring that the issuance of shares to the promoters will not result in an unfair increase of their stake at a preferential price.

It said, “SEBI guidelines set forth specific requirements as to preferential issues of shares or other financial instruments convertible into shares. In particular, the issuance price must be no less than the higher of (i) the average market price during the 90 trading days preceding the resolution date; or (ii) the average market price during the 10 trading days preceding the resolution date. In our opinion, such a requirement will protect the interests of shareholders by ensuring that the issuance of shares to the promoters will not result in an unfair increase of their stake at a preferential price.” 

Glass Lewis further stated that assuming full conversion of warrants into equity shares of the company, the dilution to current shareholders will be capped at approximately 15% of the share capital and the requirement is considered reasonable. “We recommend that shareholders vote FOR this proposal,” the proxy advisor stated.

The ‘For’ status is another boost to Zee’s ask from its shareholders.  Last week, Stakeholders Empowerment Services (SES) also changed its stance and switched its recommendation from ‘Against’ to ‘For.’ This came in the backdrop of an ‘Ask Me Anything’ webinar organised by Zee, in which the company clarified the structure of their requirement. The market response, too, got amended after the webinar. 

In total, three proxy advisors had voted and recommended against the issuance. Out of this, SES, on Friday last week, updated and changed its stance. The two other advisors - InGovern and Institutional Investor Advisory Services (IiAS) have so far maintained their opposition to the preferential allotment plan. 

Zee’s EGM will be conducted via video conferencing on July 10 at 11:00 AM. Remote e-voting is open from July 6 to 9 via the NSDL platform, with July 3 set as the cut-off date. The warrant issuance is the sole item on the agenda.