We’ll lift Zee stake to 26%; no plan to raise external funds: Subhash Chandra

Is it a deja vu moment after Sony pulled the plug on the deal, stock is at an all-time low, and investors are trying to oust the Zee promoter family?

As you know, the 25th of January was the fifth anniversary of our failure in the capital market, when Zee’s shares fell almost 40%. That time, I had 38 lenders sitting in my board room. I was accompanied by Punit and Amit on my side and I asked the lenders to have patience. I promised that I would repay all of them. They agreed, which was a first in India’s financial history, where lenders gave the borrower a year to pay back, after I failed to pay them back in time.

Not everyone succeeds in all the businesses they do, but we still repaid almost 92% of the lenders. Five years down the line, I am asking the shareholders to have patience. Punit is the right person to run the company and there is no problem with Zee. It is a profitable, zero-debt company.

Were you on board with the Sony merger and what was your reaction when you realized it is probably failing?

As a founder and promoter, Zee still remains my child and I want it to progress, flourish and remain in good hands. So, when this proposal of a merger with Sony came in September 2021, it took me two to three days to say yes. Knowing that Sony is a Japanese company also gave me comfort that Zee can continue to run as an Indian company, performing the role of the soft power for India.

It was only in the first week of December last year that I was told of some problems brewing that may result in the merger not happening. As a family, we were of the view that the merger was good for Zee, for all its shareholders, viewers and other stakeholders. That is why we were supporting this deal.

Sony asked Punit to step aside due to the Securities and Exchange Board of India (Sebi) investigation, despite the fact that the Securities Appellate Tribunal (SAT) overturned the order, and Sebi did not go to the Supreme Court against the SAT order. Punit was ready to step aside, but there had to be certain safeguards.

In between, Sony started driving the business from the backseat, which I didn’t realize till I took stock of everything. In the name of compliance, Zee spent ₹400 crore in settling some claims, just because Sony wanted them settled. Claims which would have otherwise been challenged, like the IPRS matter, were paid off and it impacted the performance of the company.

Now investors again saying that Punit should step aside.

The question for the shareholders is if you think Punit can’t run the business, who can? Let me tell you that Zee is a very complex business. It produces 50 hours of content daily across Hindi, regional and 10 international languages. This is unheard of.

Some shareholders may think that if Punit stepped aside, Sony would agree to the merger. But that is not true. This was already offered to Sony. As the founding family, we wrote to them and we had decided that even if Sony is demanding Punit’s separation, we will agree to it but let us at least meet once. But they even refused to give me time for a meeting to close this discussion. So if shareholders think that Sony would agree to the merger if Punit stepped aside, it is ill-founded.

What do you think of Sony’s demand for $90 million in termination fees?

They are going with the premise that offence is the best defence. From what I have been told and seen, Zee and Punit have done everything to make this merger possible.

What is the plan ahead for the promoter family? Do you anticipate any hostile takeover attempts?

There are always many suiters for a beautiful girl, who is of a marriageable age.

But as of now, I have advised my immediate and extended family to increase their shareholding in Zee. Amit (younger son) has earned reasonably well while being in Dubai. I have also asked him to invest. Slowly and gradually, we want to increase our shareholding in Zee.

That would require a lot of cash. Do you have that kind of money or will raise it again?

We eventually want to go back to 26%, but it will take time. Yes; we will need a lot of money. But we are clear that we are not going to raise funds from the outside. We don’t want debt. It’s not going to be overnight, but that’s the intent.

So will you be open to any merger offers?

That’s a decision that Punit and the board will have to take. I will not be interfering in any of those discussions. If they ask me, I will definitely give my suggestion. My only wish would be, if we are partnering with someone, it should be a good company.

What really went wrong? Everyone kept saying Zee needed the merger due to its poor performance.

I have mentioned in the past what went wrong and my mistakes. But Zee continues to be a profitable company. Whatever the issue, is at the promoter level, not at operations. Unfortunately, the overall market was bad for the entire media and entertainment industry in the last 2 years. Ad revenues were down whether for TV, print or any other segment.

Furthermore, Punit and his team were distracted with the merger with approvals needed from the Competition Commission of India (CCI), and the National Company Law Tribunal (NCLT).

Going forward, with the plans that I have seen from Punit, I am 100% confident that Zee will be able to pull it back soon. Ebitda margins, which have dropped down to 10-12%, will go back to 20% plus. However, as a shareholder, I will not accept anything below 25% and for this, Zee will have to work harder. I think it’s a matter of 3-4 quarters that Zee will deliver ₹2000 crore plus Ebitda.

Punit is a people person and a team player, but while he was busy with the merger, some wild grass has grown under his feet, which I am sure he will now focus on weeding out.