1 week ago
ZEEL Gains as Promoters Get Convertible Warrants Amid UBS Sell
Zee Entertainment gave its promoters special warrants that can later become company shares.
Each warrant can turn into one share priced at Rs 126.
The buyer has already paid part of the price and must pay Rs 94.50 more if converting.
The warrants can be converted within 18 months.
For now, the company’s paid-up share capital has not changed.
ZEEL’s advertising revenue fell in the latest quarter, although subscription revenue grew.
The company said advertising was affected by the Middle East conflict and hoped conditions would improve in the third quarter.
UBS remained cautious and said the stock could fall, setting a target of Rs 85.
ZEEL allotted promoters convertible warrants, supporting a gain in its shares.
Each warrant can convert into one equity share at an issue price of Rs 126.
The allottee may convert the warrants in one or more tranches within 18 months.
ZEEL’s paid-up share capital remains unchanged because only warrants have been allotted so far.
UBS retained its Sell rating, citing weak June-quarter performance and a target price of Rs 85.
- Who
- Zee Entertainment Enterprises Limited, its promoters, and UBS.
- What
- ZEEL allotted convertible warrants to promoters, while UBS maintained a Sell rating on the stock.
- Where
- The articles do not specify a location.
- When
- The articles do not specify when the warrants were allotted; conversion is allowed within 18 months of allotment.
- Why
- The warrants provide a route for promoters to acquire ZEEL shares, while UBS cited weak advertising revenue, higher operating expenses, and low EBITDA margins for its cautious view.
Warrant-Driven Optimism
Analyst Caution
Effect of the promoter warrants
Warrant-Driven Optimism
The warrant allotment gave ZEEL’s promoters a route to acquire additional shares and coincided with gains in the stock.
Analyst Caution
The warrants do not immediately increase ZEEL’s paid-up share capital, and any share issuance depends on later conversion.
Business outlook
Warrant-Driven Optimism
ZEEL management expressed optimism about re-entering sports and acquiring more sports properties prudently, while hoping for advertising recovery in the third quarter.
Analyst Caution
UBS said the June-quarter results were soft, with advertising revenue down 12% year over year and EBITDA margins at 4.1%.
Stock valuation
Warrant-Driven Optimism
The warrant issue price is Rs 126 per share, indicating the price set for shares resulting from conversion.
Analyst Caution
UBS retained its Sell rating with an Rs 85 target, while the reported Bloomberg consensus target of Rs 98.96 implied 8% downside.
Key facts
- Warrant conversion price
- Rs 126 per warrant, including a premium of Rs 125.
- Remaining payment
- Rs 94.50 per warrant, or 75% of the issue price, is payable upon conversion.
- Conversion period
- The warrants can be converted in one or more tranches within 18 months of allotment.
- Current share capital
- ZEEL’s paid-up share capital is unchanged because only warrants have been allotted.
- June-quarter advertising revenue
- Advertising revenue declined 12% year over year.
- June-quarter subscription revenue
- Subscription revenue grew 16% year over year.
- UBS view
- UBS maintained a Sell rating with a target price of Rs 85.
Sources
Related news
Zee Entertainment Allots Warrants, Promoter Stake Could Reach 17.90%
Zee Entertainment Allots ₹2,639 Crore Warrants to Promoter Entity
SAT Allows Zee's Rs 3,100 Crore Fundraise; SEBI Ban Continues
Zee Entertainment shares fall as lenders challenge NCLT repayment plan
SAT questions Sebi's two-month ban on Zee, reserves interim order
Swiss Committee Backs Softer UBS Capital Plan Using AT1 Debt
UBS Upgrades Three Indian IT Stocks, Downgrades Two
Why HDFC Bank Faces Questions Over Life Settlement Funds
Analyst Upgrades Lift Apollo Tyres, Narayana Hrudayalaya Shares
