Kotak Institutional Equities has retained its ‘Reduce’ rating on Zee Entertainment Enterprises Ltd (ZEEL) while raising the target price to ₹127, following the company’s decision to issue fully convertible warrants to its promoter group.

According to the report, Zee’s board has approved the issuance of warrants worth ₹2,240 crore at a conversion price of ₹132 per warrant. Once converted, this will raise the promoter group’s stake from 3.99% to 18.39%, a move that the company claims will serve a dual purpose: fortifying the core business while potentially funding value-accretive growth opportunities, and strengthening promoter accountability.

Kotak has increased its valuation multiple to 13x (from 12x earlier) to reflect the promoter’s renewed involvement and the potential long-term strategic intent.

However, the brokerage remains cautious and has chosen to retain the ‘Reduce’ rating as it awaits:

  1. Clarity on the end-use of growth capital, and

  2. A broad-based recovery in the linear television advertising environment.

Disclaimer: The views expressed in this article are based on brokerage reports and are not investment recommendations by Business Upturn. Readers are advised to consult their financial advisor before making any investment decisions.