
Brokerage firm MOFSL has suggested a 'Neutral' rating on ZEE Entertainment Enterprises Ltd (ZEEL) shares after the board of directors of the company approved the issuance of up to 16.95 crore fully convertible warrants to promoter group entities on a preferential basis at Rs 132 per warrant (2.6 per cent premium to the SEBI floor price). This is after Nuvama Institutional Equities last week suggested a 'Buy' rating on the stock citing five reasons.
While the intended use of funds has not been disclosed yet, capital allocation will remain a key monitorable, said MOFSL. "At the outset, we view the promoters’ move to raise their stake in the company as a positive development. Our earnings remain unchanged as we await further clarity on usage of funds. We remain Neutral on Zee with revised target to Rs 150 (earlier Rs 125), premised on 14 times FY27E PE (vs. 12x earlier) as we await sustained revival in ad revenue and favorable outcome in ICC rights arbitration with Star," MOFSL said.
ZEE aims to deliver a revenue CAGR of 8-10 per cent with its current portfolio and improve Ebitda margins to an industry-leading range of 18-20 per cent by FY26.
"We believe that a sustainable recovery in ad revenue remains key to achieving these aspirations and driving a potential re-rating of multiples. Our earnings estimates are unchanged as we await more clarity on the use of promoter fund infusion (~INR22b) and FCCBs (~INR20b). However, the fund infusion will provide Zee with enough firepower to improve its competitive position in the industry," it said.
Nuvama last week maintained its 'Buy' stance on ZEEL, setting a target price of Rs 178. This decision is supported by ZEE's strategic initiatives aimed at improving financial performance and expanding its content offerings.
Nuvama highlighted several factors underpinning its positive view, notably ZEE's efforts to enhance its Ebitda margin to 18–20 per cent by FY26, up from 14.4 per cent in FY25. The company plans to achieve this through cost control measures and reducing EBITDA losses in its streaming platform, ZEE5, by up to 60 per cent in FY26 after an initial 50 per cent reduction in FY25.
Furthermore, ZEE is aiming for ad revenue growth of 8–10 per cent year-on-year, recovering from an 11 per cent decline in FY25. This optimistic outlook is part of broader strategic discussions set to be reviewed by ZEE’s board on June 16, 2025, focusing on business plans over the next three to five years, including fundraising and risk mitigation strategies.
Financially, as of 31 March 2025, ZEE reported an increase in cash and cash equivalents by 102 per cent, totalling INR 2,410 crore, which represents approximately 19 per cent of its market capitalisation. This bolstered cash position provides the company with significant leverage for future investments and operational improvements.
A notable development is ZEE's strategic equity partnership with Bullet, a cutting-edge content and tech start-up. This collaboration aims to enhance ZEE's content offerings and technological capabilities, with ZEE5 integrating Bullet’s platform to leverage its existing user base and extensive regional language library.
Additionally, insider buying activity has been observed, with the wife and son of Mr. Punit Goenka acquiring a 0.47 per cent stake in the company through open market transactions over the past three months. This increase in stake to 4.46 per cent is seen as a positive signal to minority investors, potentially boosting investor confidence.
Overall, the brokerage's decision to retain its 'Buy' rating reflects confidence in ZEE's strategic direction and operational improvements, which are expected to enhance profitability and market presence in the coming years.