ZEEL’s Goenka Faces Shareholder Backlash Amidst Controversies

ZEEL shares surge on Goenka’s new role

ZEEL’s Goenka Faces Shareholder Backlash Amidst Controversies Shares of Zee Entertainment Enterprises Ltd (ZEEL) rose by over 7% following the resignation of Punit Goenka as Managing Director, with his appointment as CEO of the company. The move, effective from November 18, allows Goenka to focus fully on operational responsibilities assigned by the board. The company stated that this change is part of its strategy to boost performance and profitability. ZEEL’s shares hit an intraday high of Rs 123.89, marking a 7.35% increase, and were trading at Rs 123.56 by mid-morning. This change comes after a strong Q2 result, with a 70.24% increase in consolidated net profit. The board expressed confidence in Goenka’s leadership to drive growth.

ZEEL’s Goenka Faces Shareholder Backlash Amidst Controversie Punit Goenka’s resignation as the Managing Director of Zee Entertainment Enterprises Ltd (ZEEL) and his continued appointment as CEO comes at a crucial time when proxy advisory firms, Institutional Investor Advisory Services (IiAS) and InGovern Research Services, have raised significant concerns over his leadership. The recommendation to reject his reappointment as Managing Director stems from multiple issues, including the failed $10 billion merger with Sony, which has been seen as a lost opportunity for shareholder wealth creation. Additionally, under Goenka’s leadership, ZEEL’s profits have nearly halved, and the company’s EBITDA (earnings before interest, tax, depreciation, and amortization) has declined substantially from ₹1,630 crore in FY20 to ₹910 crore in FY24.

The proxy firms also flagged concerns over corporate governance issues, citing pending litigations, related party transactions, and fund diversion allegations raised by SEBI. The ongoing legal issues and the reputational risks associated with them are further complicating Goenka’s position.

Goenka’s continued role as CEO, despite these challenges, is seen by some as a sign of board backing. In their notice to shareholders, ZEEL’s board credited Goenka with resolving some of the company’s legal disputes, including the Sony merger issue, and highlighted his efforts in restructuring the company, which has led to a modest improvement in EBITDA margins. However, advisory firms remain critical, particularly regarding his failure to achieve earlier stated goals and concerns over the company’s new strategic growth plan, which focuses on cost-cutting and efficiency but lacks confidence among investors.

The upcoming AGM on November 28 will be pivotal, with the outcome largely depending on how shareholders, especially retail investors who now hold a significant portion of ZEEL’s stock, view the advice from these proxy firms. This is a critical juncture for Goenka, as his ability to secure the support of over 50% of the shareholders to continue in his role as CEO remains uncertain.