Four days after selling a stake in India’s largest listed television network, Subhash Chandra, who founded Zee Entertainment Enterprises Ltd (ZEEL) in 1992, has stepped down as chairman of the company, paving the way for the company’s transition to an institutionally managed entity.
Chandra will, however, continue as a non-executive director on the company’s board, while his son Punit Goenka will continue as managing director and chief executive officer of ZEEL. The company is yet to announce who will replace Chandra as chairman.
On 21 November, a clutch of institutional investors bailed out the promoters of ZEEL by buying a 15.7% stake in the company, helping Chandra repay lenders more than ₹11,000 crore of promoter debt. Post the share sale to several institutional buyers such as GIC and Blackrock, the shareholding of Subhash Chandra-controlled holding companies stood at about 5%, making ZEEL an institutionally owned company. US-based hedge fund Invesco Oppenheimer, the largest shareholder in ZEEL, owns 18.74% stake. “In light of the changes in shareholding, Mr. Subhash Chandra has expressed his intention to resign as chairman of the board with immediate effect. The board accepted his resignation and noted that this is in line with the requirements of Regulation 17 (lB) of Sebi Listing Regulations, which inter alia mandates that the chairperson of the board shall not be related to the managing director or the chief executive officer of the company," the company said in its stock market filing.
“While Shri Chandra stepped aside from the chair, he also expressed the desire to step aside as a board member," the release said. “However, the entire board requested him to not only continue as a board member but also to be the ‘mentor’ to the executive management and its MD & CEO." Over the last three days, three board members resigned, including Niharika Vora (independent director), Sunil Sharma (independent director), and Subodh Kumar (nominee of Subhash Chandra’s Essel group). The incoming directors are R. Gopalan, an IAS officer with stints in the ministry of commerce and industry, Surendra Singh, a retired IPS officer; and Aparajita Jain, executive director of Nature Morte Art Ltd, a leading contemporary art gallery. The reconstituted board consists of six independent directors and two members from the Essel Group, Subhash Chandra and Punit Goenka. However, people in the know said that more nominee directors from new investors, along with the new chairman, will be announced in the coming days.
On 5 November, Mint first reported that Chandra may lose say in Zee Entertainment as a clutch of asset managers, non-bank lenders and foreign portfolio investors, who had extended loans to Zee’s promoter group companies against share pledges, planned to put their pledged shares in an escrow account in preparation for a sale. The lenders had initiated discussions with potential bidders, including strategic investors, to sell the bulk of the pledged shares.
Mint had reported on 15 October that VTB Capital Plc, a unit of Russia’s state-controlled lender VTB Group, was in talks with two potential strategic investors to sell a 10.71% stake in ZEEL, which was pledged by Zee’s promoter group entities. Essel Group was not able to honour the repayment to VTB Capital, which forced the latter to secure the right to sell the pledged Zee shares. According to BSE data, at the end of September, the promoter group held a 22.37% stake in ZEEL. Of this, 96% was pledged. If the entire pledged holding is sold off, Chandra will be left with 0.89% stake in Zee. Essel Group companies together owe an additional ₹11,400 crore, according to a 5 October Mint report.