The Zee saga takes a fresh twist with Invesco's NCLT move

Why Invesco has decided to take Zee Entertainment to the National Company Law Tribunal (NCLT) is not easy to understand. There is time till 2 October for Zee to call for an extraordinary general meeting (EGM). Invesco shot off a letter on September 11,  seeking the ouster of Punit Goenka, Zee's MD and CEO, and also reconstitute the company's board.

This would have been possible only at an EGM. Right after that, Zee announced a proposed merger with Sony Pictures Network to create an entertainment behemoth.

Shriram Subramanian, Founder & Managing Director at InGovern, a proxy advisory firm, believes Invesco, that holds an 18% stake in Zee, has needlessly jumped the gun. According to him, Section 100 (of the Companies Act) gives the company 21 days to call for the EGM.

"And in any event, even if the company does not call for it, Section 100 allows Invesco to call the EGM on its own at the cost of the company and directors," he explains.

Meanwhile, analysts tracking the sector think Invesco probably did not believe Zee would have called for it. "The merger with Sony is more critical and that obviously is more important," says one at a domestic brokerage.

Also read: Zee Entertainment calls Invesco's NCLT move 'impulsive or premature'

The case is scheduled to come up for hearing tomorrow (30 September) at the Mumbai bench of the NCLT. Media reports say it is being done by Invesco under Section 98 (1) and 100 - basically asking for NCLT to direct Zee to call for an EGM.

Meanwhile, Zee in a statement said, "The Board of the Company remains committed to act within the framework of law and is focused towards enhancing the Company's growth and shareholder value. It is in the process of taking the required steps within the statutory period. The Company does not wish to comment on any impulsive or premature steps taken by Invesco Developing Markets Funds and OFI Global China Fund, LLC."

Also Read: Invesco renews demand for EGM to reshuffle Zee Entertainment board

Of course, the Zee stock has been on fire since 11 September. "When Sony has shown commitment to a deal, and the markets are viewing the Sony-Zee merger as a positive, it merits the question on the motivation of Invesco and whether it is out to derail the merger," says Subramanian.

To his mind, Zee's other shareholders will not be clear on the motivation behind Invesco's move. "The NCLT process may be detrimental to the interests of all shareholders as it could delay the Sony-Zee merger process. However, it should not impact the Sony due diligence process itself and Sony seems to be committed to this merger with Punit Goenka as the MD," he adds.

Also read: Everything you want to know about Invesco, the fund seeking removal of Zee Entertainment's Punit Goenka

Also Read: Zee-Sony merger: A win-win for both, strategically and geographically