Institutional investors, who own a majority stake in Zee Entertainment Enterprises Ltd (ZEEL), are seeking more clarity from the Invesco fund on its proposal to revamp the board of the company and will support it if the plan is well defined. Large investors prefer continuity at the top to avoid any disruption in the operations of the company.
“Though it’s too early, we would also be going with the Invesco Fund on this issue. Having said that, we would also look at who would be at the helm of the company if the existing CEO (chief executive officer) is removed from the job. There is a concern on the leadership role as this is a media company and not any manufacturing company,” said a senior official of a mutual fund. “We continue to believe that the company has strong business models and once new management comes in, there will be a re-rating in the shares,” the official said. Institutional investors hold the key to the battle as they own a 78 per cent stake in ZEEL. Government-owned insurance companies own close to 10 per cent.
Invesco Developing Markets Fund (formerly Invesco Oppenheimer Developing Markets Fund) and OFI Global China Fund LLC, which own 18 per cent in the company, have sought removal of the current Managing Director (MD) and CEO Punit Goenka and appointment of six directors on the board as its nominees. This was after two proxy advisory firms, InGovern and IiAS, flagged corporate governance lapses with the promoters, who hold just 4 per cent and are leading the company.
Zee shares, which surged 40 per cent on Tuesday on reports that Invesco had sought a change in the board, were down 2 per cent on Wednesday at Rs 256 a share.
“There is uncertainty if Goenka will stay as CEO. In our view, there is a good professional team in all key departments at Zee below MD level. The key question is whether they will stay back in case Goenka leaves Zee,” said Edelweiss in a note.
“In our view, Goenka has been a decent MD and has addressed most of the investor concerns. He was seen as a person focussed on core businesses by exiting loss-making channels such as sports, launched successful TV channels in regional space, was aggressive in channels of the future — OTT, had a sustainable low-cost content strategy and gave space to professionals (unlike earlier times),” it said.
Institutional investors say with promoters holding just 3.99 per cent in Zee and the stock languishing, it was only a matter of time before the board was revamped.
After the resignation of two directors, officials say the next event to watch for would be the extraordinary general meeting (EGM) called by Invesco. According to the current rules, the board needs to call the EGM within 21 days following receipt of the requisition to decide on these proposals. Or else, Invesco can call an EGM within the next 45 days.
According to an Edelweiss note, if the Board does not call the meeting within 21 days of receiving a valid requisition in regard to any matter, then the meeting may be called and held by the requisitionists themselves within three months of the date of the requisition. The quorum must be present within half an hour from the time appointed for holding the meeting or the meeting would be cancelled.
Also, Edelweiss said an ordinary resolution was enough for removing the director. “In accordance with Section 169 of the Companies Act 2013, a company may remove a director, not being a director appointed by the tribunal under Section 242, by an ordinary resolution,” it said. An ordinary resolution is defined in this Act (Section 191) and means a resolution passed by a simple majority (50 per cent or above) of the votes cast by the members, entitled to vote, to be voted in person or by a proxy at a general meeting of the company. Business Standard