Zee Entertainment has faced allegations on corporate governance standards of the company raised by the Independent Directors who recently resigned from the board.
Defending the company, Punit Goenka, MD & CEO of the company told CNBC-TV18 that the company has followed the highest level of corporate governance when it comes to disclosures and making things public.
On the new board composition he said, the board has not been fully reconstituted yet, adding that to give confidence to their shareholders and institutional investors they would bring in people with digital and media expertise.
Talking about reappointment of MD & CEO, he said the board has appointed a third party agency to conduct an entire survey of what MD & CEO of Zee Entertainment should be paid and the details of the contract terms.
When asked if they would have to take write-off in case there was default like situation in companies like Dist TV and Siti Cable, he said they do not expect the health of these companies to deteriorate significantly for them to take write-offs.
Talking about the company's strategy in face of consolidation of many competitors, he said, if the market is getting divided amongst players, you have to continuously launch new products and you have to continuously make sure that one plus one is equal to not two but eleven.
Below is the transcript of his interview:
Q: Last few days have been quite eventful for your company, a massive change in the shareholding, from being a promoter-led company to now one of the most widely held companies with maximum participation from the institutional investors. But also some of the allegations by your outgoing directors who recently resigned have also sullied the overall perception about the company. Broadly, how will you address the concerns on corporate governance that have been raised by the directors?
A: I wouldn’t go at that extreme to call them allegations, I think what the directors have done is firstly, I respect their decision to resign from the company’s board. In the true spirit of corporate governance they have always guided me to disclose and make all public disclosures to the stock exchanges as well as to our shareholders which we have done in truly the spirit of corporate governance. So I don’t really considered it that they have sullied the reputation of the company or made any such allegations.
I am very clear that the company has followed the highest level of corporate governance when it comes to disclosures and making things public.
Q: As far as the new board composition is concerned, there have also been questions raised that you could have got more quality independent directors who were better positioned to get the confidence of the investors as well. So what are you doing on that regards, is your board reconstitution complete or are you going take more steps and who is going to be the new chairman?
A: The board is not fully reconstituted yet. As you will see from our announcement itself, we said that we have to further strengthen the board. We will be bringing people with digital world expertise, we will be bringing other personalities from the media world who will further strengthen the board and give the confidence to our shareholders, to our institutional shareholders that this company is truly going to be run independently.
As far as the chairman is concerned, the board will definitely take a decision in terms of who the chairman is going to be in times to come. Let us leave at that for now.
Q: Are there any new investor or investors who have fortified their position in the company like Invesco Oppenheimer, do they have a board seat or also the authorisation of nomination on the board?
A: No, as you know all these investors are open market investors and Material Non-Public Information (MNPI) guidelines etc. restrict them from putting nominations on any company’s board and therefore they have not sort any of those. While we were always open to any such reactions by them, but they have on their own accord not sought any nominations from us. But definitely they have strengthened their position.
Invesco Oppenheimer is now more than 19 percent shareholding in the company. There was another participant who was a significant large single digit shareholder has now further fortified their position in this stake sale process as well.
Q: Before going forward with your new plans as a new company with the new shareholders coming in, let us first address some of the issues that have been raised. Of course you have given a point by point rebuttal to some of the questions but the larger issue has been some of the linkages to the related party transactions and also your dependence on some of the other group companies like Dish TV as well as Siti Cable. What about the receivables coming in from that company and we have seen the stock price of Dish TV so there is some weakness seen there. Do you think that is going to be a risk factor considering that you have many business relations with this company as well?
A: First and foremost Dish TV and Siti Cable both have been good distribution partners for the company. They have always supported us whenever it came to new launches of channels that we have done unlike other distribution partners that have always negotiated for either carriage fees or lower pay-outs to you. But they have always supported us. Going forward, we believe by just cutting off the signals to them and breaking relationships would have been detrimental not just to them but even our viewership and therefore we have taken a conscious decision to continue providing them the signals and recover our money over period of time and make the disclosures accordingly.
They have made payments to us as late as the current week that just went by. I do not see any risk from them coming to our payment schedule. I am pretty confident as I am committed to our shareholders that by March 2020 it will be back to normal business.
Q: If the financial health of any of these companies goes down, what could be the impact on Zee Entertainment as a listed company? Will you have to take any write-offs if there is a default situation in any of the companies like Siti Cable and Dish TV?
A: I do not anticipate that their companies’ health will deteriorate that significantly that that may require us to take write-offs. I am pretty confident that Dish TV’s numbers are still stable, Siti Cable numbers have only become healthier as I have been told by my corporate team, but I believe that our recoverables are fully secured by virtue of their commitments to us already.
Q: To allay any fear, if you could also give us an understanding on what portion of your revenues could be attached to these businesses?
A: Those are confidential information but it is not very significant. I am pretty confident that that number will remain in the small ballpark that it is and let me assure my shareholders that none of that has any medium to long-term impact on the health of the company even if something as drastic as their financial deterioration is to happen.
Q: Focusing on the letters that you had published to the exchanges on board directors’ resignations. Niharika Vora in the statement, in the letter had also mentioned a special audit to be conducted by the company on the various related party transactions and corporate governance standards. Is that something that is in the offing?
A: It’s already underway as we speak. The auditors are already looking at that. So that was already ordered as per their letters and it’s under progress.
Q: One more new development as part of the letter which has not been addressed so far has been the various discussions and the terms of the reappointment of the MD & CEO of the company which is you. So that has not been part of the minutes or documentation of the board agenda and the conduct - that is something that Niharika Vora’s letter has also highlighted. Would you like to throw more light on that particular bit? What are these terms and condition that were discussed by the board on the reappointment of MD & CEO?
A: The board has decided to appoint a third party agency to conduct an entire survey of what the MD & CEO of Zee Entertainment should be paid and what should be the terms of his contract – that contract has already been awarded to a third party, which is doing the work. As soon as the proposal comes back to the board, I am sure the board will consider and make those information public.
Q: These independent agencies either doing a special audit or else doing the survey on the remuneration and other aspects could give much better clarity on the operations. What is the timeline in which some of these reports and the results of these surveys can be coming out?
A: As far as the terms for my appointment are concerned, I believe that will happen over the next six-eight weeks. The audit process is an ongoing process, there are no deadlines to it and every quarter, the auditors will report back on their findings as and when they discover those. So it is an ongoing process for us.
Q: These are two very important points but also what else are you doing to strengthen your board in terms of also inspiring more investor confidence and also building a better corporate governance standards given that it is now widely held and there are more investors participating in the company?
A: As I said in the earlier part of the interview itself that we will be bringing on more independent directors on the board across several fields from the media world itself and you will see those announcements coming out as and when the board takes those decisions to be made public.
Q: Now it is a new company in a way with many changes that we have seen in the past few months and with the overhang of the pledged share concerns going away. What is the new beginning that we are looking at, what is going to change in terms of the strategy? I am sure, management time and energy has been spent a lot on other aspects than the business, so what are you going to put in practice now when it comes to the actual business performance?
A: Nothing much changes but as you rightly said that I was distracted with handling all the overhang issues etc. My time is now going to be focused solely on running the company and I am happy to report that our plans on the broadcasting side are playing out well. We have identified critical regional markets that we have gaps in our portfolio. That over the next 12-18 months will be addressed very aggressively. These markets are based on not just language etc but also the cultural affinities and therefore the content that is created for these markets are designed for these markets and not just taken from other markets, dubbed and put there. That is on the broadcasting side.
I am pretty confident that we will be back to our number one position fairly soon. We have lost some ground but we will definitely recover that in the coming quarters itself.
On the Zee5 front, which is our digital platform, I am very happy with the progress that the team has made so far. The platform is growing from strength to strength. We have achieved significant in-roads not just in the metros – as you will agree that OTT is no longer just the metro game, it is far seeped into the roots of our country. You would agree that with the data costs and the penetration of the telephone connectivity on the rise in this country, content is definitely going to be the key driver for data consumption and we are seeing almost more than 40 percent of our subscriber base or consumer base coming from tier-II, tier-III cities. I am very happy that the market is growing pretty well.
On the international front also Zee5 is making significant progress in the markets like UK, in Middle-East, in Southeast Asia. We are yet to enter the US but I am pretty confident that Zee5 will be a turning point in the international business, which has been stagnated over the past several years.
Our ancillary businesses like Movies etc, things are doing well. As I have mentioned several times that the heroes of our movies are scripts and we will continue to focus on that. The Live business is progressing well. The Music business has already emerged as the second largest publisher of music in this country and I am pretty confident that they will be giving their competitions sleepless nights. So this is what the strategy is in a place for the next two years at least.
Q: When we talk about Zee5, a lot hinges on the success of this particular space and it is a very competitive space, what is your particular strategy to build yourself and take on the leadership position here?
A: The strategy is two-pronged. On the technology front, we have to have the best technology partners, who work with us to deliver the seamless experience to the consumer. Because the digital world gives the power into the consumers’ hand directly, it is the power of one. Therefore, customisation to the individual becomes a key for success.
Therefore, my team has been working round the clock with international partners putting the right technology backend in place and secondly, content has to be the integral part of success and Zee has always differentiated itself with the content that we have created for the consumers and that has been the key to our success in broadcasting.
I am confident that it will be the key to our success in digital as well.
Already, we are the largest creators of original content for the OTT platform in this country and I am pretty confident that with our regional portfolio of content for Zee5 we will make strength to strength for the platform to grow.
Q: What about the viewership marketshare? That has dipped and also margins that have come under pressure given the economic nature and the ad-spend nature of the business right now. How are you seeing that particular bit in terms of the economics of your business and the overall economic scenario in the country as well?
A: Zee has been a prudent company from day one. 27 years back when we conceptualised and launched Zee, we have been prudent to the court till date. With the advertising market in the economy slowdown that we are seeing, we have seen some impact to our margins but in the current year itself, the subscription flip that we got on the back of the new tariff order has helped us to make up all of that loss. We are pretty confident for the current year to still deliver the 30 percent plus margin and I am confident that even in the coming year, we will be able to maintain that.
Q: My final question to you, at a time like this - consolidation is something which is taking shape in your sector and it is the survival of the fittest, in the face of consolidation of many competitors, how do you strategise your survival?
A: My survival has always been that if the market is getting divided amongst players, you have to continuously launch new products and you have to continuously make sure that one plus one is equal to not two but eleven. That is what our strategy is going to be that while the markets are getting consolidated, how do we make sure that we remain relevant to the consumer at the end of the day. If that means we need to partner with certain players in the market, we will do so.
As you can see on our OTT side, we are partnered with a very leading OTT player where the content is now mutually exclusively available on their OTT platform and our OTT platform and those kind of partnerships, which help the company as well as the partner to grow, we will continue to evaluate.
Q: The Company in the new avatar, will you also be taking some big strategic decisions of monetising any assets or restructuring or else any tie-ups with any other partner?
A: Happy to look at everything and all. As of now nothing on the cards that I can talk about but there will be right time to monetise assets, there will be a right time to create strategic partnerships and I am looking forward to all such initiatives and my doors are open for any suggestions by anybody who has any plans to look at us and create partnerships.
First Published: IST