Subhash Chandra, chairman emeritus of Zee Entertainment Enterprises, has alleged that Sony intentionally prevented a merger despite the Zee promoters’ offer – during extended negotiations – to have Punit Goenka step aside from the chief executive’s post. Chandra said Zee intends to sue the Japanese company for damages. The Zee founder also told Vinod Mahanta & Javed Farooqui in an interview that the promoter family would be raising its stake in the company by 5% soon, to eventually total 26%. Edited excerpts. So the stumbling block was that Sony didn’t want Punit as CEO…
I am aware that some shareholders still believe that if Punit had stepped aside, Sony would have proceeded with the merger. We did present that option to Sony. On December 14-15, the matter was discussed within the family. Punit and the family collectively decided he should step aside, and the merger should proceed because it was beneficial for Zee. This decision was communicated to Sony. It wasn’t acceptable to Sony. I believe this was Sony’s strategy all along: To engage with Zee and eventually withdraw, portraying Zee as vulnerable. I intend to convey this perspective to the Zee board as well.
But Sony did, in fact, extend the deal by a month, to explore if there was any possibility of an agreement. It is now alleging that Zee didn’t fulfil the merger conditions…
In arbitration and the NCLT case, it will be demonstrated that Zee has met the majority of conditions and prerequisites.
However, there are a couple of conditions that could only be finalised once the merger was actually completed. The reason for not fulfilling these conditions earlier was the potential implications for Zee, if the merger didn’t go ahead as planned.So, will Zee sue Sony for damages?
We will have to. If I were the CEO of the company, I would have sued them already. I can prove that it was Sony’s criminal design to start the merger process and then withdraw. As a promoter, I am seriously considering filing a criminal case against Sony.
In the past few days, have you reached out to either the Ambanis or the Adanis for a possible alternative deal? Has any private equity firm made an offer?
I have not approached either of the groups. But Zee is an asset that cannot be replicated. There is a saying in Hindi that goes, “When you have a beautiful daughter, there will be many suitors.” Indeed, several large private equity firms had approached, with offers to provide loans and increase promoter shareholding. Personally, I don’t have any appetite for additional debt. I’ve worked hard to extricate myself from such situations, and it took me five years. Now, I lack the courage to take on more debt.
Is the promoter family looking at raising its stake?
Yes, the promoter family is indeed considering raising its stake in the company. I’ve personally encouraged both my immediate and extended family to increase their holdings in Zee. I’ve also approached my younger son, Amit Goenka, a successful NRI, and he has agreed to invest in Zee instead of other companies. While it may take some time, we are working toward acquiring an additional 5% soon – and eventually holding 26%.
Has Sebi called you personally regarding this investigation?
Yes, finally, they have. I will go and explain my position on every matter.
Zee’s share price crashed 33% on January 23, and the market cap has fallen to Rs 15,680 crore. A lot of retailer investors suffered losses…
I was truly distressed that day, knowing so many people would suffer losses through no fault of their own. However, I believe the worst is behind us. On January 26, 2019, I gathered 38 lenders in our boardroom and assured them that I would repay them, asking only for some time. They granted me that time. Today, I’m conveying a similar message to our minority shareholders: Have patience for three to four quarters with Punit and the board, and you will see the results. The company will rebound to the levels it once achieved. At its peak, Zee’s Ebitda was Rs 2,400 crore, and it will reach those numbers again. Zee is a complex organisation and Punit is still the best person to run it.
Do you expect Disney to sue Zee for breach of contract in the ICC TV rights deal case?
I expect some legal action. I am sure Disney will also be exploring some options.
Was Sony on board for buying the ICC rights?
I believe they were. Sony had sports channels in their bouquet. Zee’s balance sheet does not support paying $1.4-1.5 billion for the ICC rights.
What are your options now that Sony has terminated its partnership with Zee? Is Zee currently seeking a financial or strategic partner?
I don’t believe Zee needs any alternatives. There is no debt, no additional working capital requirement, so external assistance is not necessary. From the perspective of a founder-promoter, I can confidently say this is a unique selling point of Zee; it’s in our DNA. We can generate profits from the resources at our disposal. I recall that in 1998-99, an analyst predicted that Zee wouldn’t survive in this competitive environment. Kaun Banega Crorepati (KBC) was launched a year or two before that, which impacted Zee’s ratings. However, Zee not only survived, but also thrived. Over the past two decades, numerous well-funded competitors have entered the space but couldn’t dent Zee’s position.
I firmly believe that content creation isn’t solely dependent on money; it’s about empowering creative minds and listening to their ideas from a viewer’s perspective, rather than as the MD of the company. Whether Zee requires a strategic partner or an investor – that’s a decision for Punit and the Zee board to make. If concerns arise about low shareholding potentially causing problems – like what Invesco did, by calling an EGM to replace the board or for any other reason – Punit and the board will have to decide.
Isn’t Zee vulnerable to a hostile takeover, given that its market value has seen huge erosion? How do you plan to fend off such a move?
That’s always a possibility. There are multiple companies in India, including some within the Tata group, where promoter-shareholders hold single-digit stakes. As a founder-promoter of this business, my message is that shareholders should give Punit nine to 12 months to demonstrate his abilities.
What was your reaction when Punit informed you about the deal for the first time?
I requested some time to contemplate it and asked Punit to clarify the reasons behind pursuing the deal. This decision was influenced by the ongoing Invesco episode, where there was an offer for a merger with Viacom18 from Reliance. While the deal appeared favourable for Punit and the family, it was not in the best interest of all shareholders. The Zee board, in its wisdom, pointed out that although it might benefit the promoter family, it would not be advantageous for minority shareholders, and as a founder member, I supported the board’s stance.
Regarding the Sebi investigation, the regulator has stuck to its claim in a counter-affidavit to the appellate tribunal that Zee paid Rs 200 crore to seven entities linked to the Essel Group. Your comments…
Sebi said, ‘You have siphoned off Rs 200 crore from Zee,’ but my question is, where has the money gone? If money had been moved, in this day and age, there would have been a trail. I should have that money in my system somewhere. I have repaid Rs 40,000 crore-plus to banks. I have all the details available.
The current Zee board has been accused of turning a blind eye to corporate governance lapses. How do you respond to such allegations?
All I can say is that we might have committed some mistakes, and they can be termed as lapses; however, there was no intentional wrongdoing. The allegation that we have siphoned off money is not correct. I have repaid Rs 40,000-42,000 crore to banks and investors, and my security for that was just Rs 20,000 crore. I could have paid the sum, released the security, and for the rest of the amount, I could have simply stated that I didn’t have the money. People might have filed cases, and I could have hired an army of lawyers to defend myself against the Rs 22,000 crore claim while retaining control of the companies I have had to sell. Why would I even have had to sell a stake in Zee?
Recently, two resolutions seeking the reappointment of independent directors Vivek Mehra and Sasha Mirchandani were defeated, as the proposals failed to get approval from 75% of shareholders. Doesn’t this indicate shareholder dissatisfaction with the current board?
One director, Adesh Kumar Gupta, had withdrawn his candidature earlier, and a proxy firm had expressed concerns about another director serving on too many boards and audit committees. I reiterate that while there may have been corporate governance lapses, they were not intentional.
