Two former directors on the board of Zee Entertainment Enterprises Ltd (ZEEL), the television network promoted by Subhash Chandra’s Essel group, had cited certain management decisions that prompted their resignation over the last few days.
Subodh Kumar, a non-independent director on the board, had resigned on Saturday (23 November) while Neharika Vora, an independent director, resigned on Monday (25 November).
Among the reasons listed are film advances of ₹2200 crore given in 2018-19, laxity in spending funds for corporate social responsibility and large outstanding dues from Essel group companies Dish TV and Siticable.
In an exchange filing, ZEEL informed investors that Subodh Kumar and Neharika Vora “have both given certain reasons, which have been considered by the Board of Directors" for their resignation. “The company, while accepting the resignations and intimating the exchanges about the same, has discussed the same in detail in the board meeting held on November 25, 2019. The Board of Directors have noted that all of the issues raised by the resigning directors have been duly discussed, deliberated and acted upon from time to time in the previous committee/ board meetings in which the said directors were also present. All these have been duly disclosed in the public domain in financial statements and investor calls which are available on the company website," the exchange notice said.
A third director, Sunil Sharma (nominee of the Essel group) also tendered his resignation on Monday but attributed his exit to the reconstitution of the board.
In the filing, ZEEL said that details of the film advances of ₹2200 crore have already been disclosed in the annual report and clarified in various investor interactions. To the directors’ concerns on a scheduled bank having appropriated ₹200 crore of the ZEEL’s fixed deposits towards promoter loans, the company said: “Issues pertaining to the wrongful revocation of the bank guarantee stand resolved with the company having being secured by the promoter companies and appropriate legal notices were sent to the bank at the relevant time."
The company added that CSR funds have been allocated in compliance with the law (and this has been certified by chairman of the CSR committee) and necessary certification obtained.
The directors also raised concerns on a scheduled bank having written to all directors in October 2019 that a subsidiary of the company had guaranteed the repayment of certain loan given by the bank to a related party. ZEEL countered, saying: “The company has a legal opinion to state that the company is not liable and in any event there has been no enforcement of the 'guarantee' by the bank, other than to write letters, including to all the directors."
Regarding a letter received from a PMS (portfolio management services) entity holding preference shares of the company raising questions regarding build-up of related party balances and advances for content acquisition, the company said: “Audit of the issues pertaining to related party transactions and advances is underway by auditors."
Regarding the outstanding from Dish TV and Siticable, ZEEL said: “The same have been secured by definitive plan and situation is being strictly monitored as instructed by the board and also discussed in various analyst calls."
On Monday, 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, were appointed as independent directors to the board of ZEEL, replacing the outgoing directors.
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.
"Zee Entertainment Enterprises Ltd. as a Company, has always adhered to the highest levels of corporate governance, maintaining utmost transparency across all aspects. In its letter issued to the stock exchange today, the company has clarified and responded to all the reasons of resignation expressed by Mr. Subodh Kumar and Ms. Neharika Vora. The company wishes to clarify that all the points expressed by the mentioned Directors have been disclosed in the public domain, through various investor and shareholder communication modes, as was required," a company spokesperson said.
"The entire Board of Directors of the Company stand unanimous by the comments conveyed to the stock exchange. The company wishes to thank Ms. Neharika Vora, Mr. Subodh Kumar and Mr. Sunil Sharma for their valuable contribution and respects their desire to resign. The Company also wishes to reassure all its esteemed shareholders, investors and bankers, that it will continue to follow utmost standards of Corporate Governance, as it has till date and will consistently focus on creating value for all of its internal and external stakeholders," the statement added.