Shares of Zee Entertainment Enterprises rose 45 per cent to hit an all-time high of Rs 270.85 on BSE after the company disclosed that two institutional investors — Invesco Developing Markets Fund and OFI Global China Fund IIC — that collectively hold around 17.88 per cent stake in Zee Entertainment have sought the removal of Managing Director Punit Goenka and two others as the directors of the company.
The stock ended 40 per cent higher at Rs 261.50 against the previous close of Rs 186.80 on BSE. Market capitalisation of the firm rose to Rs 25,117.49 crore. It has gained 21 per cent in the last 12 months and has risen 17 per cent since the beginning of this year.
These two investors, via the September-12 letter, had called for an extraordinary general meeting (EGM) of the company shareholders to pass the three ordinary resolutions.
They also sought the removal of Manish Chokhani and Ashok Kurien as the directors of the company. Meanwhile, after the resignations, Kurien ceased to be a Member of the Corporate Social Responsibility Committee and Stakeholders Relationship Committee of the board with immediate effect, the company said. It said Manish Chokhani also ceased to be a Member of the Nomination and Remuneration Committee and Risk Management Committee of the Board.
As per Zee Entertainment, it received the investors’ letter on September 12 titled ‘Requisition for calling an Extraordinary General Meeting of the shareholders of the Company’, under Section 100(2)(a) and other applicable provisions of the Companies Act, 2013.
“Punit Goenka is MD & CEO. Resignation of him as Director seems inevitable. His continuance as CEO will be positive. If he resigns as MD & CEO then Zee may witness disruption in business in the short term. It has seen almost 300-350 bps market share loss from peak to 17% now. Nevertheless, irrespective of whether Punit Goenka resigns or continues as CEO, the PE warrants re-rating. This is on account of group-level distractions and consequent governance overhang in past 3-4 years,” said Dolat Capital.
“We have persistently highlighted in our notes of potential change in management, improvement in cash flows and traction in digital business as key re-rating triggers. At CMP, Zee trades at attractive 15/13x FY23/24E EPS. With one of the key triggers getting activated we upgrade our target multiple from 13x to 20x Sep-23E EPS with the target price of Rs 328 (vs. Rs 204) and rating to BUY (from Reduce),” added the brokerage house.
Zee Entertainment said it’s examining the said letter, related attachments and will take the necessary action as per applicable law.
