The occasion couldn’t have been better for Zee Entertainment (Zee), best-known for its eponymous TV channels, which launched India’s cable & satellite revolution in 1992. Just days ahead of Zee CEO Punit Goenka’s 50th birthday on June 20, the company announced plans by the promoters to hike their stake in the company to over 18%. This was on June 16. The stock rose 4% a day after and analysts gave a thumbs-up to the promoters’ proposed capital infusion of Rs 2,237 crore into the firm.
But, much like the plot twists of its flagship channel’s daily soaps, Zee has seen the tables turn since the June 16 announcement. Proxy advisory firms have asked shareholders to vote against the proposed promoter plan as a result of which Zee stock is down 4% in the last one week.
Clearly, Goenka, who is the face of Zee and had relinquished the position of MD in November last year to focus on rebuilding Zee in the wake of its failed merger with Sony, faces a litmus test. A shareholder vote on the promoter proposal to increase stake in Zee is scheduled for July 10 and the unified stand by proxy advisory firms, including Stakeholders Empowerment Services (SES), InGovern, and Institutional Investor Advisory Services (IiAS), hardly bodes well for the company.
Investors tend to follow recommendations made by proxy advisory firms, industry experts said, and Zee as well as Goenka have not shared an easy relationship with them. In 2021, for instance, Invesco, which was a shareholder in Zee with an 18% stake, sought to reconstitute the board and remove Goenka as the MD and CEO of the company over alleged corporate governance issues. Zee declined to call a shareholders meeting then and the matter landed in court. While the two sides reached a truce in March 2022 and Invesco exited the firm in 2023, the public spat raised concerns about promoter-shareholder alignment on key issues concerning management of companies.
Goenka once again had a difficult time with shareholders in November last year, when retail investors at Zee struck down the proposal to re-appoint him on the board at the firm’s annual general meeting.
A media veteran and described as ‘Mr Positive’ by colleagues and industry insiders, Goenka, the elder son of Zee founder-promoter Subhash Chandra, is no stranger to challenges. The last six years has seen Zee go through a roller-coaster ride – from dealing with a promoter default crisis, to tackling regulatory scrutiny over alleged fund diversion issues to dealing with a failed merger with Sony. Friends say he is life’s favourite punching bag and should be given a chance to revive the company at a time when the competitive landscape is rapidly evolving within media and entertainment. The merger of Viacom18 and Star India has meant that Zee is fighting a large and deep-pocketed player and will need the firepower that a promoter infusion will bring, say some experts.
First appointed CEO of Zee in 2008 replacing the then chief executive Pradeep Guha, Goenka’s experience in entertainment began in 1993, selling amusement park packages for Essel World. He would go on to work in different Essel group companies including Essel Packaging, Dish TV and Zee Sports. He became business head of Zee TV in 2005, working his way up.
The latest wave of investor pessimism at Zee comes at a time when Goenka is looking to transform the company into a content and technology player. The first few steps were taken in June, when Zee invested in a tech startup Bullet. While Zee did not disclose the stake size or investment amount in Bullet, the partnership with the latter would see the launch of a new “micro-drama” application, it said, which was focused on fast-paced, creator-driven, short-duration content, targeted at mobile-first audiences.
The Zee board has also maintained that the proposed promoter fundraise was a step towards reinforcing Zee’s strategic roadmap, something Goenka has said he is committed towards. This includes targeting higher margins and viewership share as well as aiming for a growth between 8-10% in ad revenue this fiscal. The company has also found backing from three public pension funds – California State Teachers’ Retirement System, Florida State Board of Administration and California Public Employees’ Retirement System – who have voted in favour of the proposal through a platform provided by American proxy advisory firm Glass Lewis.
Domestic proxy advisory firms, however, have argued that Zee does not the need the money from promoters since it has Rs 2,410 crore in cash and treasury, enough for its current needs. It has also said that alternatives such as a rights issue should have been considered over promoter infusion.