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Key shareholders seek removal of Zee Entertainment’s MD and CEO

Our Bureau Mumbai | Updated on September 14, 2021

Proxy advisory firm InGovern raises concern over role of audit committee

Even as Zee Entertainment's largest shareholders, Invesco Developing Markets Fund and OFI Global China Fund, called for the removal of the company’s MD and CEOPunit Goenka, corporate governance advisory body InGovern has raised concerns over his appointment to the company’s audit committee.

Goenka was appointed a member of the audit committee with effect from March 17, 2021, replacing Ashok Kurien and Manish Chokhani. InGovern noted that it was surprising that a promoter and MD, Goenka, a non-independent executive director, has been appointed as an audit committee member.

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“It is strange that the Board allowed such induction of a promoter executive director into the audit committee,” said InGovern.

Goenka is the son of Essel Group patriarch, Subhash Chandra. Essel Group owns 4 per cent stake in Zee after selling their majority stake to pay Chandra’s mounting ₹13,000-crore debt. Zee’s largest shareholders have called an Extraordinary General Meeting for the removal of Goenka from the company’s board of directors. The date of the EGM is yet to be notified.

Other concerns

Proxy advisory firm Investor Advisory Services also raised concerns against Ashok Kurien and Manish Chokhani, calling against their re-appointment to the company’s board of directors during the AGM which was held on Tuesday.

However, Kurien and Chokhani resigned ahead of the AGM. Other concerns raised by InGovern against the Essel Group include the fact that some party transactions related to the audit committee overseen by Kurien and Chokhani have led to the promoters’Essel Group shareholding being reduced to 3.99 per cent. “Zee is probably one of the few companies where the promoters retain significant control over the company with very little shareholding,” InGovern said.

Under Chokhani and Kurien, the audit committee did very little to safeguard the interests of the company and the minority shareholders, according to InGovern.

“Even the currently qualified consolidated financial statements show that little has been done to completely unwind all abusive related party transactions. The audit committee has not ensured that the Put Option is properly recognised in the books as per accounting standards,” said the InGovern report.

Meanwhile, shares of Zee Entertainment Enterprises Ltd rallied 40 per cent, recording fresh highs on Tuesday.

The rally also pushed Nifty Media index up 14.40 per cent at closing to 1,972.50. The index, during the day, also hit a fresh 52-week high of 1,995.20.

Binod Modi, Head Strategy at Reliance Securities, said, “Notably, Nifty Media index gained12 per cent mainly led by a sharp rally in Zee Entertainment following growing expectations of improvement in corporate governance standards after large investors sought the ouster of select directors of the company.”

Updated rating

Kotak Securities updated the rating of the stock to ‘Buy’ with a Future Value of ₹250.

“We expect the stock to re-rate and the gap between Zee’s market value and intrinsic value to narrow notwithstanding the evolving situation,” it said in a note.

Meanwhile, Rakesh Jhunjhunwala-owned Rare Enterprises bought shares of Zee Entertainment Enterprises on Tuesday, data provided by stock exchanges revealed. Rare picked up 5 million shares (0.52 per cent stake) at ₹220 per share for ₹110.2 crore.

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Published on September 14, 2021

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