It seems that Zee founder Subhash Chandra’s family control of the showbiz company, which made satellite TV’s entry into India and now an online market, is going through a change. On Monday, Zee Entertainment Enterprises Ltd (ZEEL) announced that its two largest shareholders – Invesco Developing Markets Fund and OFI Global China Fund, which hold approximately 18% of its shares, have submitted a stipulation for removal as directors of the company. Special shareholder meeting has been called. Its chief executive is Puneet Goenka, the founder’s son, who remained in charge of the family after offloading most of its equity in the 2019 debt-reduction exercise of its parent Essel Group, which had expanded into infrastructure and shadow-lender IL&L. After FS found myself tight for cash. The family’s stake fell from 40% to around 4%, but institutional investors were happy to see Goenka continue to run the company. It is unusual for mutual funds in India to be vocal as shareholders, and so Invesco’s move has attracted attention. It is unclear whether Invesco’s bid to restructure the board will receive substantial support from other shareholders. About 58% of ZEEL is held by foreign portfolio investors. Investor guidance from two leading proxy advisory firms has supported the move to revamp the board. Foreign institutional investors, who disclose their voting in such cases, will be mindful of both future returns as well as assumptions. It remains to be seen whether the Chandra family will be able to rally in shareholder support and defeat Invesco’s move.
If the Chandra family loses their ultimate control over ZEEL, it will mark the end of a remarkable chapter in the history of India’s media entrepreneurship. He got the chance to show unseen films on Indian screens and built an empire with over 40 channels broadcast in 11 languages across the subcontinent and beyond. Goenka has been a part of this story. Looking at ZEEL’s financial results, it is difficult to argue that the company was doing badly. Kovid reduced its advertising revenue in the last financial year, as did other media companies, but there was no reduction in its net profit. There were no signs of distress even in its latest quarter. Its share price, however, is an entirely different matter. That’s down 55% since Invesco took a 9.4% stake in July 2019, even though the broader market has risen. To be fair, the pandemic has disproportionately affected media companies, as advertisers slash budgets. The shock of the change in control has revived the stock, which climbed 40% on Tuesday. While it may be tempting to see the markets cheering for Goenka’s possible expulsion, a part of this rally could also be driven by speculative trading. The market may also assume that the logical conclusion of a potential takeover of control by financial investors may be a final sale at the right price to a strategic investor.
It could be argued that the company hasn’t exactly shone in its digital pivot. Its online streaming app Zee5 is up against big apps like Netflix, Amazon Prime, Disney-Hotstar and Sony-Liv. While Zee is a strong contender in the broadcasting market, in the OTT space, it is a bit run-of-the-mill. Zee has experimented with pay-per-view mechanism for blockbuster offerings. Its consequences are unknown, but it is clear that success in streaming will be crucial for entertainment players of the TV age. The Fortune may still turn to the appeal of novelty, no stranger to Zee in its early days.
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