Zee Entertainment shares rally 8% after SAT grants interim relief in Sebi order

Shares of Zee Entertainment Enterprises (ZEEL) surged 8% to a daily peak of Rs 105 on the BSE on Friday following an interim relief ruling by the Securities Appellate Tribunal (SAT). The tribunal halted the Securities and Exchange Board of India (SEBI) order against ZEE, allowing the company to proceed with a proposed Rs 3,143 crore preferential warrant issue to its promoters.

Furthermore, the tribunal enabled ZEE to utilize its mutual fund units for dividend distribution. However, this relief is contingent on the company settling the penalty imposed by SEBI. Earlier, on Wednesday, SAT had reserved its order on interim relief petitions filed by ZEE and CEO Punit Goenka against SEBI's July 31 directive, which prohibited them from engaging in the securities market.

The SEBI action arose from title documents related to a property in Hyderabad, owned by ZEE. The regulator accused ZEE of providing the title deeds to Indiabulls Housing Finance as collateral for loans taken by entities linked to the promoters, without obtaining the required corporate approvals. ZEE refuted these claims, stating that the documents were obtained without authorization and that there was no evidence indicating the company's knowledge of the arrangement.

Furthermore, ZEE contended that it did not engage in any fraudulent activities in the securities market. The company had approached SAT for permission to finalize the proposed Rs 3,143 crore preferential warrant issue, citing a limited time frame for the fundraising. ZEE had informed the tribunal that shareholders had already approved the issue, and they had obtained in-principal approval from the stock exchanges.

During the hearing, SAT asked SEBI why it prevented ZEE from completing the fundraise during the two-month market-access ban. SAT pointed out that the company could have carried out the transaction after the restriction lifted. SEBI argued that permitting the preferential issue while the market-access restriction was still in effect would dilute the impact of the ban resulting from regulatory violations.

The regulator also opposed Punit Goenka's involvement in the issue, claiming that he is the ultimate beneficial owner of Sunbright Mauritius Investments and himself is subject to a one-year securities-market ban. SEBI contended that allowing the allotment through the Mauritius-based entity could effectively grant indirect access to the securities market for Goenka.