In a rarest event in the Indian corporate history, the shareholders of Zee Entertainment Enterprise Ltd has rejected the proposal for reappointment of promoter Punit Goenka as a director. Mr. Goenka was earlier Managing Director and CEO of the company and had recently stepped down from the Managing Director to focus on his responsibility as CEO. The promoter family holds little less than 4% stake in the company. It is interesting to see how the promoters are able to run the company now onwards. Though, there is no immediate hurdle for Mr. Goenka in his role as CEO, but the action of shareholders should be taken seriously. They might have fed up with the attitude of promoters and the underperformance of the stock price. It is to be worth noting that the public institutions hold 38.68% stake in the company and 74.36% of them exercised their voting right. 52.42% of them voted in favour of re-appointment of Mr. Goenka. So, the promoters still have good support from public institutions. Public Non-Institutions shareholders hold 57.33% stake in the company and merely 13.07% exercised their voting right. But they overwhelmingly rejected the reappointment of Mr. Goenka as a director by voting 88.36% out of their vote casted (i.e 13.07%) against the proposal.  

What Next ?

So the public shareholders has shown their anger by throwing out Punit Goenka from the board and his re-entry as a board member seems impossible or it will take a long time (again depends upon the voting results). Now, the following can be the possible scenarios.

• Resignation by Punit from the post of CEO : One possibility is that Mr. Goenka resigns from the post of CEO and give the existing management and public shareholders a free hand to run the company. However, possibility of this happening is remote as the promoters has been reluctant to cede the control over the company.
• Strategic Investor/ Takeover : Now the promoters have less bargaining power, it is possible that they find a new suiter as early as possible for the company in order to get the maximum for the little stake in the company.
• Removal of Punit Goenka as CEO : It is possible that the board removes Mr. Goenka as CEO and appoint a new professional CEO in order to run the company professionally and to find a new investor/promoter.

Stock Price Movement

The stock price of the company has heavily underperformed the bench mark Nifty and currently trading at INR 129. However, it has started showing some kind of reversal on the ratio chart. It seems that market is sensing some kind of positive action with regard to the company. The stock price has already moved above 20 DEMA and 50 DEMA. However, the ratio chart moving above the redline (See the ratio chart below) will confirm the breakout.

Investors should keep watch on the developments in the company. In my opinion, it will be very positive for this company, if a new management/ promoter comes in to run the company.

Disclosure

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Vinay Kumar Taparia

SEBI Registered Research Analyst
Registration No. INH000018276

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