Shares of Zee Entertainment were locked in the 15 per cent upper circuit at Rs 215 on the BSE in Tuesday’s session after Invesco Developing Markets Fund and OFI Global China Fund Llc, which own a combined 17.9 per cent stake in the company, called for an extra-ordinary shareholders’ meet to remove Punit Goenka (promoter group) as director along with removal of two other directors Manish Chokhani and Ashok Kurien, who resigned yesterday. They have also sought appointment of six independent directors.
The stock trades in the futures & option (F&O) segment, which has no circuit limits. The stock of the broadcasting & cable TV operator has gained 29 per cent from its 52-week low of Rs 166.80 touched on August 23, 2021. Among other ZEE group stocks, Zee Learn surged 17 per cent to Rs 15.17, while Zee Media Corporation was locked at the 5 per cent upper circuit at Rs 10.44 on the BSE.
“Invesco has sought removal of Punit Goenka, currently MD of the company, from the board and two independent directors. This is a step in the right direction. Invesco wants a professional board at the helm that can steer the company in the right direction. There have been issues with the leadership in the past – Punit Goenka and Subhash Chandra – that the investors and markets objected to. With a miniscule holding in the entities, Goenka’s have been calling the shots. The market has already taken this development positively,” said A K Prabhakar, head of research at IDBI Capital.
In a late evening statement to the stock exchanges, Zee Entertainment said the funds sought appointment of six of its own nominees on the board of Zee. The promoters, Subhash Chandra family owns only 4 percent of the company and had to sell their stake to pay off the debt worth Rs 13,000 crore taken by the promoter entities of ZEEL after defaulting. CLICK HERE FOR FULL RELEASE
Jaykumar Doshi, an analyst tracking the company at Kotak Institutional Equities expects the Zee Board to call an extraordinary general meeting (EGM) within three weeks, failing which investors may themselves call an EGM within three months. He believes there can be a change in the composition of Board, followed by a change in management. Alternatively, there can be a change in Board but the management may continuity or continuity of management with a new set of investors, where there will be a shareholder churn and a new set of investors / shareholders back Punit Goenka as MD & CEO.
“We note that a reconstitution of the Board as proposed by Invesco needs a majority (51 per cent votes out of the total votes) to be passed at the EGM. The promoter family owns 4 per cent of the company,” Doshi said.
Meanwhile, in a separate exchange filing, Zee Entertainment announced that two non-executive non-independent directors, Ashok Kurien and Manish Chokhani on Monday resigned from the board of the company. Ashok Kurien resigned due to his pre-occupation, while, Manish Chokhani resigned due to changed life circumstances and perspective post COVID, the company said. The Annual General Meeting (AGM) of the Zee Entertainment will be held today, September 14, 2021, at 4.30 pm through video conferencing/ other audio visual means.
“While we await the actual outcome of the meet, with promoters group holding only around 4 per cent stake, it is likely that this resolution will go through. This move is likely to remove promoter led overhang on the stock, owing to past instances of inefficient allocation of capital, related party transaction, etc”, ICICI Securities said in a note.