One of the much-awaited merger deal in Indian Media and Entertainment ecosystem that is expected to create a largest Broadcast Network in the country has hit a road block with uncertainly over the future of the deal. Was it due to the difference between the parties? Certainly not, the statutory bodies are the one to be blamed.
While the parties involved in the deal Culver Max Entertainment Pvt. Ltd. (formerly Sony Pictures Networks India Pvt.) and Zee Entrainment Enterprises Ltd. (ZEEL) are eager to complete the merger process and kickstart the business progressively under the new entity, the market regulator SEBI (Securities and Exchange Board of India) has stepped in just when everything is ripe to conclude the deal as intended by the parties in H1 of 2023.
The recent SEBI order issued against the former Chairman of ZEEL, Subhash Chandra and his son Punit Goenka, the present Managing Director of ZEEL, revolves around the 200 crore borrowed from Yes Bank and the Letter of Comfort (LoC) issued against the loan which permits Yes Bank to square of a Fixed Deposit (FD) of equal amount held by any Essel Group company including ZEEL.
When we look back into the asset status of the promotors of the ZEE Group, one can easily realise that ZEEL was comfortably controlled by Mr Chandra and his family with 40 pc stakes in the company until 2019. Meanwhile, like others, Essel Group also aspired to expand its businesses in to diversified areas such as Infra, Green Energy, Distribution etc. with considerable investments. The new norms implemented in the banking sector through various reforms to strengthen the asset quality and gross NPA ratio since 2018 has resulted in banks scrambling towards a tight lending regime. Due to this, business entities ranging from MSMEs to large corporates started feeling the heat and they were forced to restructure their financials. The worst affected where those which invested in infra projects. Essel Group was one such company which suffered due to headwinds in Indian infrastructure industry with considerable exposure. However, The Chairman of Essel Group, Mr Subash Chandra in his open letter dated March 2019 assured his lenders that he will clear his dues by September 2019 and stood by his words by raising moneys to payback the group company debts by offloading the family stakes in ZEEL to the tube of 36 pc that resulted in promoters shareholding in ZEEL hitting 3.99 pc in October 2021.
Despite the gloomy economic conditions due to demonetisation, the implementation of GST and the pandemic lockdowns, Punit Goenka had steered ZEEL towards all round growth and his initiative to merge ZEE-Sony to create a largest Media and Entertainment company in India was regarded as master stroke. The entire Indian media ecosystem was eagerly awaiting the launch of the merged entity. While Mr Goenka had sailed through the hurdles posed by InvesCo and others, it is unfortunate that the deal is getting dragged due to challenges from unexpected corners.
Did they really Siphoned off funds for their personal benefits?
In any corporations, it is common practice that resource from a healthy group company will be used to fund new initiatives of other group company. In this case the promotors of Zee Entertainment, took some proactive steps to fund some of the Essel Group Company as part of their diversified business expansion plan. When situation prompted them to return back the money to Zee Entertainment, they took necessary steps to payback. Neither the SEBI order nor in any known source of reports, the promoters made any attempt to swindle the company money for their personal gains, whatever has been done was to manage the financials of the group company and records shows that it was paid back.
The SEBI’s allegations against Subhash Chandra and Punit Goenka stated that they have Siphoned off funds by misreporting. Unfortunately, it is very transparently visible that they tried hard to keep all their group companies in good financial health by rotating funds between the group company and service the dues on time. In this process, they have been forced to offload 36 pc stakes from Zee Entertainment. However, the system chose to put them in the wrong side of the law and branded them as swindlers.
Subhash Chandra, who is regarded as the father of Indian Television industry has emotionally stood by his commitment to his lenders and retained his integrity as on date and even walked out of the dream company by relinquishing his Chairman post when situation prompted. In his recent interview to Zee Business, he stated that he has paid back over 40,000 crores to his lenders in the process of clearing Essel Group’s debts when compared, his liability of 200 crores towards Yes Bank was a meagre amount which he would have cleared in the regular process. However, the crisis on part of the banker Yes Bank that prompted them to encash the FD of Zee Entertainment has landed him in a spot, which is a violation as per the regulator.
A promoter family which strived hard for the growth of their business and honoured the lenders at the cost of selling its fortune can’t be branded as people who siphoned off funds from their own companies, don’t they deserve a better treatment.
(The author is Managing Editor, Medianews4u.com. Views are personal.)
