Pointing to the latest regulatory development and the promoters’ reluctance to raise their stake, Subramanian said, “SEBI has recently, again on January 16th, issued a show cause notice (SCN) to the promoter saying, despite having Rs 500 crore as cash with them, which they earmarked for a preferential allotment, they are not willing to increase their shareholding from buying in the market. So, all these are concerns.”
Calling on shareholders to take direct action, he added, “We would like the shareholders to be more aggressive in terms of trying to demand for extraordinary general meeting (EGM) and try to demand for a change in the board itself, or some activist investor to come… either demand that the promoter increase their shareholding, or demand for some other corporate action.”
Criticising the company’s recent communication to investors, Dalal said, “We looked at the letter that the company sent out — one, it’s not signed by anyone, two I failed to understand what has prompted this entire letter. At the end of the day, they’re arguing that several shareholders want the promoters to increase equity, but that belies the facts, right?”
Explaining why the company’s claims do not align with past voting outcomes, Dalal said, “Essentially, shareholders have voted Puneet Goenka out of the managing director’s seat, and he currently remains CEO, not managing director, and protected by the board. Effectively, shareholders have also voted out the preferential warrants that the promoters wanted… So, which investors are asking for promoters to increase equity at this stage?”Also Read: Zee Entertainment shares rise despite margin pressure in Q3
Stressing that the problem lies squarely with the board, she said, “I think what the company needs is that you have a strategic investor, somebody who basically takes control of this business, and you need a board overhaul at the end of the day, the board seems to have failed their responsibility of listening to shareholders, given the votes are very clearly cast, and the message is very clear.”
Warning that the situation will not improve without a strong activist push, Dalal added, “This is going to languish… unless you have a set of shareholders who hold more than 10% actually trying to take control and getting the board to be sort of resuscitate the entire board composition, and get a set of directors who are actually going to be independent.”
Linking Zee’s case to wider minority shareholder battles in India, Subramanian pointed to ongoing litigation, saying, “That is a blatant misuse of or abuse of power by the company… this will obviously in the Supreme Court be a marquee case followed by all minority shareholders. The other one is Jindal Poly, where, again, there’s a class action suit filed by minority shareholders. I think both these cases will sort of set the trend for how minority shareholders are handled by the companies in future.”
For the entire discussion, watch the accompanying video
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