Zee Entertainment shares jump after SAT grants interim relief against SEBI order

Zee Entertainment gained after SAT granted interim relief in its proceedings against a SEBI order, subject to the deposit of the penalty

Shares of Zee Entertainment Enterprises Ltd (ZEEL) gained as much as 7% on August 14 after the Securities Appellate Tribunal (SAT) granted conditional relief to the company in its dispute with SEBI. The order allows Zee and Punit Goenka to proceed with a proposed preferential issue of fully convertible warrants.The relief is subject to Zee and Goenka depositing their respective penalties in full within one week. SAT has also extended the deadline for issuing the warrants, which was due to expire on August 14, by another week.SEBI Bars Punit Goenka, Subhash Chandra From Securities Market over ZEE Property Mortgage Violation SAT allows fundraising plan with conditionsHowever, the broader market-access restrictions imposed by SEBI remain in force, except for the specific relief granted by SAT.ZEEL shareholders had earlier approved a Rs 3,143.52 crore preferential issue involving 24.95 crore fully convertible warrants to promoter-group entity Sunbright Mauritius Investments Ltd at Rs 126 per warrant.SAT also allowed Zee to use its mutual fund investments for regular operational requirements. The company, however, cannot use those funds for other purposes, including the proposed dividend.SEBI action linked to Hyderabad propertySEBI had, in its July 31 order, barred ZEEL from accessing the securities market for two months. Goenka and promoter Subhash Chandra were separately prohibited from accessing the market for 12 months. The regulator imposed penalties of Rs 30 lakh on ZEEL, Rs 58 lakh on Goenka and Rs 60 lakh on Chandra. The action relates to the alleged unauthorised use and pledge of ZEEL’s property in Hyderabad’s Jubilee Hills as security for loans obtained by four Essel Group entities from Indiabulls Housing Finance.According to SEBI, the property was used to secure loans of around Rs 726 crore. The regulator also flagged the absence of required approvals from ZEEL’s Audit Committee, Board and shareholders, along with inadequate disclosures concerning the pledge, related-party transaction and contingent liability.The SEBI order came on the same day shareholders approved the fundraising proposal at an extraordinary general meeting, creating uncertainty around the company's ability to execute its strategic plans. SAT's conditional relief now provides Zee with some room to proceed with the fundraising exercise.

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.

As part of the interim relief, SAT has allowed Zee Entertainment to proceed with its proposed preferential issue of warrants.