Shares of Zee Entertainment Enterprises rose 40 per cent to Rs 261.50 apiece on the BSE on Tuesday after Inv­esco Developing Markets Fund and OFI Global China Fund LLc, which own a combined 17.88 per cent of the company, called for an extraordinary shareholders’ meeting to remove Punit Goenka (promoter) as director.

They also called for the removal of two non-executive directors Manish Chokhani and Ashok Kurien, who resigned on Monday. Additionally, they have sought appointment of six independent directors on the board.

The stock trades in the futures & option (F&O) segment, which has no circuit limits. The stock of the broadcaster has gained 57 per cent from its 52-week low of Rs 166.80 touched on August 23. After Tuesday’s gains, it is now the most valuable media stock.

Among other Zee group stocks, Zee Learn surged 20 per cent to Rs 15.52, while Zee Media Corporation was locked at the 5 per cent upper circuit at Rs 10.44 apiece on the BSE. These two, however, are small-caps with market capitalisation of Rs 500-650 crore each. Dish TV, with a market cap of Rs 3,924 crore, was up 10 per cent.

“This (removal of Goenka) is a step in the right direction. Invesco wants a professional board at the helm that can steer the company in the right direction. There have been issues with the leadership in the past – Punit Goenka and Subhash Chandra – that the investors and markets objected to. With a miniscule holding in the entities, Goenkas have been calling the shots. The market has already taken this development positively,” said A K Prabhakar, head of research at IDBI Capital.

In a late evening statement to exchanges on Monday, Zee Entertainment said the funds sought appointment of six of their own nominees on the board. The promoters, Subhash Chandra family, own only 4 per cent of the company and had to sell their stake to pay off debt worth Rs 13,000 crore after defaulting.

Jaykumar Doshi, analyst at Kotak Institutional Equities, expects the Zee Board to call an extraordinary general meeting (EGM) within three weeks, failing which investors may themsel­ves call an EGM within three months.

In a scenario analysis, Doshi believes there can be a change in the composition of the board, followed by a change in management. Alternatively, there can be a change in the board but the management may continue, or thirdly, continuity of management with a new set of investors, where there will be a shareholder churn and a new set of shareholders who back Punit Goenka as managing director and chief executive officer.

“We note that a reconstitution of the board as proposed by Invesco needs a majority (51 per cent votes) to be passed at the EGM,” said Doshi, who has upgraded the stock to ‘buy’ from ‘reduce’ and target price to Rs 250 (from Rs 200).This turn of events is likely to result in an end to governance concerns, improvement in cash generation and a possible change in management. This calls for a re-rating, Doshi said.

Meanwhile, the annual general meeting (AGM) of Zee Entertainment was held on Tuesday.

Other analysts also view the events positively. “While we await the actual outcome of the (EGM) meeting, with the promoter group holding only around 4 per cent stake, it is likely that this resolution (for removal of Goenka) will go through. This move is likely to remove promoter-led overhang on the stock, owing to past instances of inefficient allocation of capital, related-party transactions, etc,” ICICI Securities said in a note.

Abneesh Roy and Amritasai Sista of Edelweiss Securities said, the Zee Entertainment stock is likely to stay volatile, given uncertainty around leadership and disruption in media. Longer term, corporate governance standards would improve. We expect strong recovery in ad spends industry-wide as FMCG companies ramp up marketing ahead of the upcoming festive period. Improving mobility should help recovery in ad spends across sectors as we move into H2FY22. The analysts have retained ‘buy’ with target price of Rs 343.

Analysts, however, point out the short-term challenges for the company both on the market share front and investments in the digital business.

Karan Taurani of Elara Capital highlights the loss of market share in the regional genre on the back of competitive intensity and poor performance in the Hindi General Entertainment Channel space. Further, while its digital business Zee5 has reported a better performance as compared to most other peers, there is a problem of investing into largescale content, which is a key to drive eyeballs to the digital medium, he adds.