The Securities Appellate Tribunal (SAT) questioned the Securities and Exchange Board of India (SEBI) on its rationale for opposing Zee Entertainment Enterprises Limited’s (ZEEL) proposed Rs 3,143 crore preferential warrant issue, despite the company’s two-month securities-market ban.
The appellate tribunal reserved its order on ZEEL’s plea seeking permission to proceed with the fundraise despite the SEBI order barring the company and its CEO, Punit Goenka, from accessing the securities market.
During the hearing, a SAT member questioned SEBI’s opposition to the issuance, pointing out that the transaction could be completed once the two-month restriction expired. “If a thing can be done after two months when it won’t be illegal, why can’t it be done today?” the SAT member observed.
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ZEEL argued that the fundraise was time-sensitive and that a two-month delay could make the deal less lucrative. The company said the funds would be received by ZEEL and used for its operations, making it in the interest of shareholders to allow the transaction to proceed.
ZEEL also argued that its shareholders had approved the issue and that it had received in-principle approval from the stock exchanges. The company questioned the timing of SEBI’s order, arguing that it effectively sought to derail the proposed warrant issue.
SEBI’s counsel defended the market-access restriction and strongly opposed allowing the issuance during the two-month ban. The regulator argued that its order was imposed over past regulatory violations and was not specifically intended to prevent ZEEL from raising funds. Allowing the company to proceed with the issuance, SEBI argued, would dilute the effect of the market-access restriction.
SEBI also opposed Punit Goenka’s participation in the transaction, arguing that he was the ultimate beneficial owner of the Mauritius-based entity, Sunbright Mauritius Investments, which was subscribing to the issue. According to SEBI’s counsel, Goenka’s stake in ZEEL would rise from 4% to 20% following the transaction.
The regulator argued that allowing the issuance could give Goenka, who is subject to a one-year securities-market ban, indirect access to the market and enable him to circumvent the restriction.
The SAT members also questioned ZEEL’s counsel about the purpose of the fundraise. The company’s counsel said the money was required for day-to-day operations and that allowing the company to receive the funds would be in the interest of investors.
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“The company needs money, and the company is getting money through this deal. It is in the investor interest to allow this transaction,” ZEEL’s counsel said.
ZEEL has also sought permission for its 15-day window to complete the transaction to begin on August 12, giving the company sufficient time to complete the issue.
After hearing both sides, the SAT reserved its interim order on ZEEL’s plea seeking permission to proceed with the transaction.
