Zee Entertainment Enterprises Ltd. (ZEEL) and its Managing Director and CEO Punit Goenka have approached the Securities Appellate Tribunal (SAT) challenging a Securities and Exchange Board of India (SEBI) order restricting their access to the securities market.
The appeal follows SEBI’s July 31 order, which barred ZEEL from accessing the securities market for two months and restrained Goenka and ZEEL founder and Chairman Emeritus Subhash Chandra from accessing the market for one year. SEBI also imposed aggregate penalties of Rs 1.48 crore—Rs 30 lakh on ZEEL, Rs 58 lakh on Goenka and Rs 60 lakh on Chandra.
The regulatory action stems from SEBI’s findings concerning a Hyderabad property owned by ZEEL that was allegedly offered as security for loans raised by entities associated with the promoter group.
According to SEBI, the arrangement was undertaken without the requisite approvals and was not adequately disclosed to the company’s board, audit committee, shareholders or investors.
The regulator’s findings relate to borrowings of around Rs 726 crore obtained for four Essel Group entities against the security of the property. SEBI held that the transaction raised issues under securities laws relating to fraudulent and unfair trade practices, as well as listing and disclosure requirements.
ZEEL and Goenka have now sought interim relief from SAT against the restrictions while challenging SEBI’s findings.
The appeal comes at a significant time for ZEEL, which is pursuing a proposed Rs 3,143.5 crore fundraise through the preferential issue of fully convertible warrants to promoter-group entity Sunbright Mauritius Investments.
ZEEL shareholders approved the proposed issue on July 31. The company plans to issue nearly 24.95 crore warrants at Rs 126 each. Upon full conversion, the promoter and promoter-group shareholding is expected to rise from around 3.99% to approximately 23.79%.
ZEEL had earlier maintained that the SEBI order would not directly affect the proposed fundraise and said it would continue with the necessary regulatory and corporate processes. The company has also indicated that it would pursue appropriate legal remedies against SEBI’s findings.
The SAT proceedings will now determine whether the restrictions imposed by SEBI should remain in force while the challenge to the regulator’s order is considered.
The latest dispute also marks another regulatory challenge involving Goenka. In 2023, SAT had set aside a SEBI order restraining him from holding key managerial positions in listed companies, while allowing the regulator to continue its investigation.
The present proceedings, however, arise from a fresh final order concerning the alleged use of ZEEL’s corporate asset for promoter-linked borrowings without the approvals and disclosures required under securities regulations.
The outcome of the SAT proceedings could assume added significance for ZEEL as it seeks to raise substantial capital for its business plans, including investments in sports, content, digital initiatives, technology and potential acquisitions.
