Shares of Zee Entertainment Enterprises Ltd (ZEEL) surged over 8% in Friday's trade, reaching a high of Rs 104.70. This significant jump follows two major positive developments: an interim relief granted by the Securities Appellate Tribunal (SAT) regarding a preferential warrant issue and the company's announcement of decent first-quarter FY27 earnings.
SAT Grants Interim Relief for Warrant Issue
The Securities Appellate Tribunal provided crucial interim relief to Zee Entertainment concerning its proposed preferential issue of warrants worth Rs 3,143 crore. This decision allows the media company to proceed with the issuance, overturning a July 31 order from the Securities and Exchange Board of India (Sebi) which Zee had challenged.
The successful appeal to SAT removes a key hurdle for Zee's capital-raising plans, signaling a positive outlook for investors and contributing significantly to the day's share price rally.
Q1 FY27 Earnings Show Growth Amidst Sporting Events
Separately, Nuvama Institutional Equities highlighted Zee's "decent" first-quarter performance for FY27. The company reported a 4.5% year-on-year (YoY) increase in revenue, aligning with analyst estimates.
Nuvama noted that the quarter was significantly shaped by the FIFA World Cup, which ran from June 11 to July 19. While some revenue from the tournament fell within Q1 FY27, a substantial portion is anticipated to be booked in Q2 FY27. Zee holds exclusive rights for FIFA events through 2034, covering 39 events, with staggered payments and a larger outlay linked to the 2030 World Cup.
In addition to FIFA, Zee has secured rights for Bundesliga and Serie A, which management believes offers a longer monetisation runway.
Key Financial Highlights from Q1 FY27:
- Subscription Revenue: Increased by 16% YoY to Rs 1,140 crore.
- Zee5 Revenue: Rose by an impressive 58% YoY to Rs 460 crore.
- Both subscription and Zee5 revenue growth were largely attributed to the FIFA tournament.
However, the quarter also saw an increase in sales and distribution (S&D) expenses, up 43% YoY, while advertising revenue declined by 11.5% YoY.
Analyst Outlook Remains Positive
Following the results and the SAT ruling, Nuvama Institutional Equities reiterated its 'Buy' rating for Zee Entertainment. The brokerage also raised its 12-month target price for ZEEL shares to Rs 117, up from its previous estimate of Rs 112, reflecting continued confidence in the company's prospects.