Zee's ₹3,143-crore fundraise may hinge on SAT relief after SEBI order

Zee Entertainment's proposed ₹3,143-crore promoter fund raise may face delays until the company obtains legal relief from the Securities Appellate Tribunal (SAT) or the conclusion of SEBI's two-month market access ban, with the case expected to be presented to the tribunal soon. The timing is challenging for the company, as on the same day shareholders approved the warrant issue to a promoter group entity, SEBI finalized its order barring ZEEL from accessing the securities market for two months and forbidding promoter Subhash Chandra and Managing Director Punit Goenka from dealing in securities for a year.

Alay Razvi, Managing Partner at Accord Juris, explained that SEBI's order creates a direct legal constraint on the transaction, preventing the company from proceeding with the issuance or allotment of warrants or other securities while the restraint is in effect. Hardeep Sachdeva, Senior Partner at AZB & Partners, noted that the exact impact of SEBI's order will hinge on the specific wording of its operative directions and the stage of the proposed preferential issue.

Shareholder approval alone does not guarantee an unconditional right to complete a capital raise, as each subsequent step must continue to comply with the Companies Act, SEBI (ICDR) Regulations, and any restrictions imposed by SEBI. A precedent from the recent Droneacharya Aerial Innovations v. SEBI case suggests that a company under regulatory market debarment may still proceed with a preferential share issue if the tribunal expressly grants that relief during an appeal against the debarment.