Zee Entertainment CEO and managing director Punit Goenka said the board has appointed an independent agency to examine his compensation and terms of the contract, one of the issues raised by Niharika Vohra, an independent director who recently resigned.
In an exclusive interview with CNBC-TV18, Goenka said the board took the decision after a detailed discussion and the results will be revealed in 6-8 weeks.
Vohra and two other directors of Zee resigned last week. Vohra and fellow independent director Sunil Sharma cited related-party loans, non-implementation of some board decisions and film advances, among other issues, as the reasons for their exit, according to an exchange filing by the company. Zee had said appropriate disclosures were made and an audit was underway.
When asked about these and other corporate governance issues raised by the directors who exited, Goenka said the company has followed the highest level of corporate governance on disclosures. "(I) respect the decision of the directors to resign. I do not think they have sullied the reputation of the company,” he said.
The resignation of the directors came after promoters sold a huge tranche of shares to reduce debt, reducing their stake in the company to 5 percent from more than 40 percent a year ago. Institutional shareholding in Zee Entertainment is now among the largest in India.
Zee named former finance secretary R Gopalan, art collector Aparajita Jain and the former head of Intelligence Bureau Surinder Singh in place of the three directors who quit.
Goenka said there was a need to strengthen the board further with appointments from the media and digital space, which will inspire confidence among investors. Amit Tandon of proxy advisory firm IiAS had told CNBC-TV18 that the company should look at inducting good quality directors who can guide the company with their expertise.
The promoters of Zee had borrowed heavily from a clutch of mutual funds and non-banking companies to fund businesses in solar energy, road projects and transmission. They had pledged Zee shares to secure these loans but were eventually forced to sell shares and repay the lenders.
Goenka said dealing with the issue of promoter pledge took much of his time and energy in the last few months. He said his focus now will entirely be directed at improving Zee’s performance.
“We have identified critical regional markets that have gaps in our portfolio. I am pretty confident that we will be back to our No.1 position in broadcasting fairly soon.”
A recent report by Kotak Securities, which downgraded Zee to ‘Add’ from ‘Buy’, pointed out that the company’s profitability “hinges on inventory amortization and investments in ZEE5”. The over the top (OTT), or media streaming, space that ZEE5 operates in continues to be highly competitive, according to Kotak Securities.
Goenka said ZEE5 has achieved success not just in metros but also in tier-2 and 3 cities. “We are growing fast and seeing 40 percent of our consumers from these cities. Overseas businesses in the UK, Middle East and SE Asia are moving well.”
On the issue of the “large outstanding from Dish TV and Siticable for content provided by Zee”, raised in the letters by the exiting directors, Goenka said it was a conscious decision because snapping ties would have been detrimental to the viewership of Zee.
In the interview, Goenka also addressed the issue of related party risks to the company, another issue raised by the directors who departed. Zee's recoverables from Dish TV and Siti are fully secure, according to him.
"I assure shareholders that none of the group companies will have a medium or long-term impact on Zee even if there is something as drastic as their financial deterioration had to happen. " He said the companies have been meeting their obligations on time and “have committed to the shareholders that business will be back to normal by March 2020”.
Another issue raised by the directors who quit was concerning the non-implementation of the decision by the board on October 17 to appoint a special auditor for “all subsidiaries and all transactions for treasury investments, all related party transactions, and advances and security deposits given for various activities”. The board has already appointed a special auditor and the company will disclose the findings, Goenka said.