Zee board approves plans to raise Rs 2,000 crore

Zee Entertainment said its board has approved plans to raise Rs 2,000 crore through various routes, including an equity share issue and qualified institutional placement (QIP).

The said amount would be raised in one or more tranches, through a private placement, a qualified institutional placement, a preferential issue or a combination of them, according to a regulatory filing from Zee Entertainment Enterprise.

"The Board of Directors of the Company at its meeting held today has, inter-alia, considered and given its in-principle approval for raising funds... not exceed Rs 2,000 crore," it said.

This will be subject to regulatory/statutory approvals, including approval of the shareholders, it added.

Though the company has not specified objects of the fundraising, experts suggested that a portion of the proceeds would be for business expansion.

This latest round of fundraising is the first after the Sony Corporation terminated a deal to merge its two entertainment entities in India with ZEEL.

After the termination of the merger agreement, ZEEL announced a strategic realignment of its revenue vertical, which is being directly driven by the MD and CEO.

In an investor conference call in March, Zee Chairman said ZEEL's performance has been impacted since 2020 due to industry-wide macro slowdown, transitory issues, and management bandwidth constraints due to merger activities.

The board has also decided to closely monitor the business model and plan presented by the MD & CEO of the company, wherein he has provided the roadmap to improve the performance and efficiency of each of the businesses to achieve higher EBITDA.

Commenting over the development, Karan Taurani SVP of Elara Capital said: "We believe this will boost investor confidence, which has been low since the merger with Sony was called off. The total fundraising amount is up to Rs 2,000 crore, which is about 14% of the current market cap, though we don't expect the entire amount to be raised." 

The cash infusion could lead to improved investor confidence and sentiment and business expansion and investments, given the increased competitive intensity in the sector following the RIL-Disney merger.

In March, ZEEL laid off 50% of its staff at its Bengaluru-based Technology and Innovation Centre.

On May 23, ZEEL sought a termination fee of USD 90 million (around Rs 748.7 crore) from the Sony Group for calling off the USD 10-billion merger deal in January this year.