 "Zeel's shareholders want a professional to lead the company: Proxy advisors")
Zee Entertainment Enterprises (ZEEL) stocks closed up by 4.87 per cent on Friday at Rs 129.10 per piece on the NSE after shareholders voted against Punit Goenka, chief executive officer (CEO), reappointment as the director of the company.
Goenka had offered to stand again as the director as his term by rotation was ending. As per ZEEL’s stock exchange filing, 50.45 per cent of the shareholders voted against the reappointment and 49.54 per cent of shareholders voted in favour of Goenka’s reappointment in the annual general meeting of the company.
Proxy advisors told Business Standard that this decision by the shareholders showcases that shareholders want a professional to lead ZEEL rather than the promoter group. The promoter group of the company, which has seven members, holds 3.99 per cent of the total voting rights, while 96.01 per cent of the voting rights are with the public shareholders.
“As expected, shareholders have voted against his reappointment. By voting against the reappointment of Punit Goenka, shareholders would be signalling that they are seeking a leadership change,” said Shriram Subramanian, founder and managing director (MD), InGovern, a proxy advisory firm. “While Mr Punit Goenka may be showing skin in the game by giving up the managing director position and continuing to be CEO, this is not a desirable outcome for shareholders. The board of directors, as trustees of shareholders, need to change the leadership of the company.”
Earlier this month, Goenka had requested the board of directors to relinquish his position as MD to focus entirely on his operational responsibilities as CEO.
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“The years of frustration which some of the investors have had with this company's style of functioning,” said a proxy advisor who did not want to be named.
The person cited above further said that there were certain issues raised by SEBI (Securities and Exchange Board of India) and which have been raised in letters from other investors like Invesco, showing that these have not been addressed in a meaningful way by the company.
In the last few years, ZEEL has faced several hurdles, one of the biggest being its $10 billion failed merger with Japan’s Sony Group, Culver Max Entertainment. At the same time, investigations from the securities regulator for fund diversion and alleged fraudulent practices have affected the entertainment major.
Subramanian also stated that SEBI should also send a show-cause notice to the company on why the shareholders' demand for change has not been implemented in spirit.
“Since the stock has done well (a day after voting against Goenka’s reappointment), it clearly means the shareholders were not happy with him,” said an analyst on the condition of anonymity. “He's (Punit Goenka) generally being blamed for the whole merger breakdown with Sony.”
The analyst further added that from a medium-term perspective, if Goenka remains in the leadership position, the company would need a bigger strategic investor to bring in more cash for major re-rating.
ZEEL’s board had given Goenka a directive at a meeting on November 15 to enhance the company’s performance and profitability levels. As per the analyst, these measures should help limit the downside levels on the stock, given that the stock has already seen a correction.
Earlier, Subhash Chandra, chairman emeritus of ZEEL, had talked about increasing the promoter's share in the company, which has not happened till now.