Zee Media has surged over 73% in just six trading sessions. In September alone, the stock has climbed nearly 63%, marking its best monthly gain on record.

The Essel Group stock’s rally has been fueled by robust trading volumes, with the average daily traded value in the past three sessions reaching ₹153 crores. Given that the company’s free float stands at ₹1,015 crores, nearly 15% of this market capitalisation was traded daily over the last few sessions.

The company’s recent approval for a major fund raise is one of the primary drivers behind this surge. Zee Media’s board has greenlit the issuance of ₹200 crores through 13 crore warrants. These warrants allow investors to convert them into equity shares within 18 months.

Despite the impressive stock performance, there are several risks associated with Zee Media that investors should factor in. The company has been grappling with consistent net losses since September 2022, highlighting underlying operational challenges.

Additionally, as of March 2024, Zee Media’s debt stood at ₹135 crores, comprising ₹2.5 crores of long-term debt and a substantial portion in short-term obligations. Notably, cash generated from operations for FY24 came in at ₹62 crores, a significant drop from FY23 levels, further straining the company’s ability to meet its financial commitments.

In light of these concerns, CareEdge downgraded Zee Media’s credit rating in July 2024, shifting the outlook from stable to negative. This downgrade was prompted by weaker financial performance, alongside doubts about the company’s capacity to generate enough cash flow to manage its sizable debt repayment obligations for FY25. This uncertain financial outlook adds a layer of caution to the optimism surrounding the stock’s current rally.

Another point of concern is the low promoter holding in Zee Media, which stood at just 0.42% as of June 30, 2024.