Subhash Chandra has resigned as the chairman of Zee Entertainment Enterprises, five days after his group sold another 16.5% stake in the company.
“In light of the changes in shareholding, Subhash Chandra has expressed his
intention to resign as Chairman of the Board with immediate effect,” the broadcasting company informed.
“The Board accepted his resignation and noted that this is in line with the requirements of Regulation 17 (lB) of SEBI Listing Regulations, which mandates that the Chairperson of the Board shall not be related to the Managing Director or the Chief Executive Officer of the company. He will remain as a non-executive director of the company,” it added.
“The Board accepted his resignation with regret and applauded his vision for the company and the industry at large. While Shri. Chandra stepped aside from the Chair, he also expressed the desire to step aside as a board member. 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,” Zee added.
The company also accepted the resignations of two independent directors and one Essel Group nominee as members of its board.
“The reconstitution of the board was to strengthen and induct independent members with varied experiences to build value and provide a strong signal to the existing and new institutional investors who have recently reposed their faith in the intrinsic value of the company, by investing Rs 4,770 cr,” it said.
The new board consists of six independent directors and two members from the Essel Group.
Subhash Chandra started Zee Entertainment, which was the biggest broadcasting company owned by an Indian till five days ago, in the early 90s as a content partner to Star TV, a Hong Kong-based broadcaster that was among the first to beam satellite channels into India.
Star sold its nearly 50% stake in Zee to Subhash Chandra in the late 90s after the two groups could not agree on jointly exploiting the opportunities opening up in India’s entertainment and satellite broadcasting business.
Zee Entertainment has since gone from strength to strength. However, ill-timed investments by Subhash Chandra and his family into unrelated businesses, particularly construction and infrastructure, forced the promoters to raise debt by pledging their shares in Zee Entertainment.
When India’s construction and infrastructure sector faced a severe funding challenge due to the bankruptcy of IL&FS last year, Subhash Chandra and his family saw their access to cheap funds curtailed, and could no longer roll-over their short-term loans.
The promoters, who used to hold around 40% of the shares of Zee Entertainment before the chain of events, saw their holdings dwindle as some of the creditors sold off the pledged shares.
They eventually reached a deal with the creditors earlier this year to pay them back via the strategic disinvestment of Zee Entertainment and any other company as required.
The promoters were initially looking for a strategic and active partner — preferably an overseas media or digital company — but eventually sold a stake of around 25% to US-based Invesco Oppenheimer fund.
Invesco Oppenheimer is learnt to be content to play the role of a ‘financial investor’ rather than a hands-on investor, and reports have indicated that Subhash Chandra’s son Punit Goenka will continue as Zee Entertainment’s CEO.