MUMBAI: With the ouster of two independent directors, namely Ashok Kurien and Manish Chokhani creating euphoric delight in the market sentiments, and contributing to a 40% rise in share values, the majority of stockholders are now seeking the resignation of Punit Goenka, CEO of Zee Entertainment Enterprises Ltd (ZEEL) and the elder son of Essel Group Chairman Subhash Chandra.

The majority holders have already announced their decision to hold an Extraordinary General Body meeting (EGM) to decide the fate of Goenka. As per corporate norms, the EGM must be held within 26 days of the declaration of intention. Alternatively, all shareholders together can call for the EGM within 46 days.

The investor enthusiasm received a major boost from Rakesh Jhunjhunwala who routed the purchase of 50 lakhs shares through his investment firm RARE Enterprises. This, however, has not yet bailed ZEEL out of the crisis from the family holding point of view. For, the patriarch Subhash Chandra facing a severe debt crisis to the tune of Rs 13,000 crores had earlier brought about a severe dip in Zee Entertainments’ share prices. The fall in value was pegged at a steep 55% and it also resulted in Chandra’s family being subject to a reduced stake of 3.99% as compared to the previous 4%.  

The largest shareholders of ZEEL, namely Invesco Developing  Markets Fund and OFI Global Chain Fund LLC at present hold 17.88% of the paid-up share capital of the company. The investors who have already succeeded in exiting directors Chokhani and Kurien are now seeking that Punit Goenka too put in his papers. The issues ailing the company in the previous three years are largely attributed to mismanagement when it comes to corporate governance. The company’s promoter family was forced to lower its stake drastically owing to diversification bids into unrelated businesses. Promptly stepping into damage control mode, the promoters admitted to the strategic lapses that they had made and made a bid to reduce the debts that kept piling up. 

The damage control mode also had to battle an image related issue as allegations were rife in the market about ZEEL dealing with a company of suspect reputation that was under the scanner for frauds. Officially, the Zee Group has vehemently denied the allegation. Punit Goenka, the eldest son of Subhash Chandra, a pioneer and owner of the Essel Group is facing flak for being appointed to the audit committee of Zee Entertainment despite being its promoter and executive director.

The Essel Group as of now owns a 3.99% stake in Zee Entertainment. An Extraordinary General Meeting (EGM) is sought to be held to decide on Goenka’s fate. The independent corporate governance research and advisory firm, InGovern which assists investors, observed that there are no indications of any remedial actions based on revised consolidated financial statements. 

The InGovern study further stated that under the former independent directors, Chokhani and Kurien, precious little was done by the audit committee to provide for the financial health of the company as well as its minority stakeholders. Amidst the ruckus that requires his trial by fire, Punit Goenka who addressed the AGM on September 14 2021 had nonchalantly dwelt on the company’s excellent track records when it came to corporate governance. Goenka also dwelt on Zee Entertainment welcoming and embracing Industry 4.0 to enhance its performance in the market. This included the usage of 5G technology. However, the future of Goenka that is slated to be decided at the EGM that will be held post-September 16, still hangs fire.