Zee's Subhash Chandra Takes Battle Against Invesco To Primetime
"This is the first time I am speaking on this but not the last," said Subhash Chandra, founder of the Zee media empire and chairman of his family-owned Essel Group.
The media baron painted a boardroom and governance battle with key institutional shareholders at Zee Entertainment Enterprises Ltd. as a hostile takeover of sorts, in an interview on his own news network.
The host interviewing him opened the show by harking back to foreign invasions of India a thousand years ago. The Mughals and the British looted India, these foreign companies (referring to the institutional investors) are the East India Company of today and they are all targeting Zee TV.
Don't let the company fall into foreign hands, Chandra said in an emotional appeal for public support later in the show.
This company is nobody's inheritance (Bapoti, he said in Hindi), Chandra clarified, lest anyone be confused about why he is opposing investor action against a company he owns barely 4% of. This company belongs to public shareholders, he pointed out.
Well, two of those public shareholders, Invesco Developing Markets Fund and OFI Global China Fund LLC, that own close to fifth of the company's shares (17.88%) have requisitioned an extraordinary general meeting of shareholders to oust Punit Goenka, managing director and chief executive officer, and appoint six independent directors. Goenka is Chandra's son and remains in leadership position even after the family had to sell down most of their holdings to repay debts of other family businesses.
Interestingly, it is Chandra who sold a large chunk of his shares to Invesco and OFI Global in 2019. At the time Invesco was already a significant shareholder (7.74%).
Key Zee Entertainment shareholders include
Foreign Portfolio Investors: 57.46%
Indian Mutual Funds: 8.1%
Insurance companies: 10%
Non-institutional public shareholders: 19.93%
Subhash Chandra: 3.99%
The two foreign institutions have highlighted the company's serious financial troubles, governance issues, resignation of independent directors and a SEBI investigation into transactions between the company and Chandra-owned family firms, as grounds for their EGM requisition. To be clear, the only legal requirement to requisition an EGM is minimum 10% voting rights.
The EGM requisition made on Sept. 11 was rejected by the Zee Entertainment board on grounds of invalidity and illegality. The matter is now in three courts at once.
The two foreign funds first moved the National Company Law Tribunal with a plea for a court-mandated EGM.
Zee Entertainment moved the Bombay High Court against the EGM requisition.
Meanwhile, the NCLT sought to pass a final order on the EGM and gave the company up to Oct. 7 to file its final response.
Now the company has moved the appellate tribunal seeking more time.
The government and regulators should take cognizance of what is going on, Chandra said on a primetime news show on Zee TV, a Hindi channel owned by his family.
"Don't focus only on the shareholder's right to call an EGM. Can it take over the company without abiding by the Takeover Code regulations." Chandra asked while speaking into camera, ostensibly to viewers.
Running a television channel is no less than running an institution like a bank, he said.
"TV channels wield influence over the public via entertainment and news, which is why prior clearance of the government is necessary before appointing a director. Both the I&B Ministry and the Home ministry have to clear appointments."
Chandra alleged Invesco's effort goes beyond changing directors, it is a "conspiracy" to takeover the company.
As per law, if an EGM is called all shareholders, including Chandra (3.99%), can vote on Goenka's fate and the appointment of new shareholders. The resolutions could very well fail if a majority are against them.
The show, spanning over 40 minutes, blurred legal, emotional and at times factual lines. "I knew who OppenheimerFunds was, their structure, but don't know who Invesco is," Chandra said. And then he wondered, aloud, whether OFI Global was a fund in China.
Invesco, an American fund, acquired OppenheimerFunds in 2018. OFI Global is an Invesco subsidiary. Last year, Chandra's Essel Group sold Zee Entertainment shares to these very funds in publicly disclosed transactions.
Chandra also suggested there may be a hidden party pushing for a takeover, without specifying who or offering anything to support his claim.
Close to the end of the show, the host asked Chandra about Zee Entertainment's recently announced merger with Sony India. The announcement came a few weeks after the EGM requisition.
Won't that too amount to a foreign acquisition? the host asked. Yes, but Sony has agreed to Punit Goenka continuing as MD and CEO for at least five years, Chandra responded.