There is never a paucity of action at Zee Entertainment Enterprises Limited (ZEEL). And Punit Goenka, a part of the promoter family, and CEO of the company, is at the centre of it.
Earlier in November, he stepped down from his position of Managing Director and CEO.
Prior to ZEEL’s annual general meeting on November 28, two proxy advisory firms put out reports recommending shareholders to not vote for Goenka’s reappointment as Director.
Eventually, ZEEL’s shareholders voted against Punit Goenka’s reappointment as director– 49.54% of the votes were in favour and 50.46% voted against the resolution.
According to Institutional Investor Advisory Services (IiAS), in a report sourced from investors, Goenka attended nine of the twelve (75%) board meetings he was authorized to attend in FY24.
“He was recused from attending five board meetings held during June 2023 to October 2023 under SEBI Orders dated 12 June 2023 and 14 August 2023. We do not support his reappointment as Managing Director and CEO, and therefore, do not support his continuation on the board,” it states.
Then, it speaks of SEBI passing an interim order “raising concerns over funds diversion, round tripping, and governance lapses” and how SAT has given interim relief to Goenka’s continuation as a board member in a listed company.
“Until the final order is issued by SEBI, we believe his continuation on the board carries both, legal and reputational risks for the company,” adds the report.
The failed $10 billion merger with Sony is also mentioned in some detail outlining Zee’s inability to close it under Goenka’s leadership and leading to “a significant loss of opportunity for shareholder wealth creation.” It then mentions how Zeel’s profits have halved during Goenka’s tenure as Managing Director. In terms of public shareholders, LIC with 4.63% is the largest followed by Government Pension Fund Global at 3.96%. Including other names like HDFC Mutual Fund, ICICI Prudential Mutual Fund, Vanguard International Value Fund and Aditya Birla Sun Life Mutual Fund adds up to 26.03%.
Meanwhile, Shriram Subramanian, Founder and Managing Director of InGovern Research Services, maintained that by voting “against the reappointment of Mr. Punit Goenka, shareholders have signalled that they are seeking a leadership change. While Mr. Goenka may be showing skin in the game by giving up the position of Managing Director and continuing to be CEO, this is not a desirable outcome for shareholders.”
According to his firm’s report, Zeel’s stock price has been volatile and has generally trended downward during his leadership.
“Following the news of governance issues and the failed merger, Zeel’s shares have seen significant declines (>60% over past 3 years), impacting investor confidence. The stock price dropped sharply after SEBI’s interim order against Mr. Goenka, reflecting market concerns over his leadership and the company’s governance practices.”
How things play out from here is key with Goenka as CEO. Ashish Kumar Singh, Managing Partner, Capstone Legal, says the margin by which Goenka has been ousted is very slim. “It is clear the promoter family was not able to secure enough support for Goenka which has led to this. From an operational standpoint, it does not make much of a difference because he continues to be the CEO of the company,” he explains. Given that the promoter family has less than 4% of Zeel’s shareholding, “it depends on other shareholders for support.”