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technology | IST

Decided to get a strategic partner to achieve global ambitions, says Zee Entertainment CEO Punit Goenka

Punit Goenka is managing director and chief executive officer of Zee Entertainment Enterprises Limited (ZEEL). The company on Wednesday its promoters led by Subhash Chandra are open to selling more than 50 percent of equity stake in ZEE.  In an exclusive interview to CNBC-TV18, Goenka said they are looking to expand beyond the South Asian diaspora in the global market and wanted to become a tech company from the emerging world. He also said that the company has received a lot of interest from several players in the global arena.
Watch the video here:
Edited Excerpts: 
There is so much juice left in the Indian market, why this sudden and dramatic announcement?
You are absolutely right. There is a lot of potentials still in the Indian market that needs to be cultivated by Zee but we believe while we do that on one hand, we have global aspirations for which the incumbents have shown us ways. It means how we can expand beyond the South Asian diaspora in the global market as well and truly become a content company or a content tech company from the emerging world.
I don’t know if your press release said that or others are assuming is it, only a foreign partner or there are people with huge technology and media ambitions?
As I stated in my press release that we are looking at technology intervention as well as geographical reach for our content beyond the South Asian diaspora, which I think is still limited from the Indian strategic point of view. Having said that, we are open to considering anybody that adds value to our business and helps us accelerate the growth beyond what we can do on our own.
So the possibility of an only Indian partner is also there or is it more a possibility of one Indian and one foreign partner?
If it is a strategic partnership, I don’t expect it to be a multiple partner deal. It will be one strategic partner that we are looking for and whoever adds the maximum value to our business will be considered to be our partner.
You said that you have received offers from a lot of players, have you zeroed in on anyone or in the process of that? If you could throw colour on the kind of players they are, technology companies or media companies, what kind of companies are they?
I did not say we have received any offers. What we have received a lot of interest over the last few months from several players in the global arena. These are technology and content companies that are spread across geographies, so it is a mixed bag of all possibilities.
If there was such strong interest, why didn’t you announce the deal itself? Why this tantalising, going to announce a deal kind of a press release?
We have been seeing a lot of speculation happening off-late considering the promoters’ interest and promoters’ pledged levels etc and speculation is something that I don’t like and hence we thought to be proactive towards our shareholders, towards our analysts and come out and tell them that this is the intent of the promoters and the company. That is the reason to do it.
So 59 percent of the promoters’ stake which is pledged will be revoked before this deal goes through?
As I have said that we had already started this process of divestment of several of the promoters assets, especially in the infrastructure side. We have already sold the transmission business, we are at advanced stages of a solar and the roads project, these three put together itself will highly deleverage the promoters pledged levels and this deal is not tantamount to that happening. So I think it is something that will happen pre this strategic partner coming into Zee itself.
What is the debt at the Essel Group level?
I am not at liberty to share that. However, our assets are well capitalised to take care of any such debt levels of the group.
There is a niggling suspicion actually to add to what Mangalam is saying that probably the leverage is high and that is why you are willing to sell upto 50 percent in the family?
Let me put it this way that the sale of the infra assets itself will give us over Rs 8,000 crore of equity value to the promoters, which in itself is a large amount of money for us to deleverage the business beyond trying to sell Zee off for that.
Are you speaking to Reliance Jio?
I am not at liberty to divulge any names right now. I am bound by strict confidentiality until I can say that. So I cannot share with you any names. Sorry about that.
About the stake, if you give away half of your current stake to a strategic partner, he gets only 20 percent, do you think somebody will put serious technology for a stake as low as 20 percent?
This is unfortunately the Indian mindset. I know of enough promoter/companies that run larger businesses with smaller economic interest than 20 percent. So I think you should look at it more from the opportunity that Zee represents to the strategic investor, the access to the market that if they were trying to do on their own would be very difficult and very expensive. Therefore, for them to get 20 percent off Zee Entertainment in itself will be very lucrative.
What plans do you see for Goenka family itself once this deal goes through at the management level and at the strategic level?
I do not expect any change to happen. I will pretty much still be here running the business going forward as well.
It’s a legitimate question. In the conference call you said that if someone writes a really big cheque, you will give away more than 50 percent. You could perhaps not have a role at all and will only be a minority shareholder, isn’t it?
If somebody writes a cheque to me, which I cannot refuse, why not. It is still worth the effort that I have put in so far. I will find something else to do with my time.
I will tell you why I am asking that question - one of the first instances and I do not want many an unhappy comparison but in 2008 when the announcement first came from Parvinder Singh’s son’s (founder of Ranbaxy) family, they just said we are not interested in our father’s business so much and that is why Malvinder and Shivinder chose to sell out. I am not taking this comparison beyond that. You have built a great business, your father built a great business; you want to stay in it invested but do something else with the money?
Yes, why not. As I said if the cheque is not refusable, I am sure I can find enough productive things to do with my time outside of Zee as well and build another business.
You have also said that the interest of minority shareholders will be taken care of. An open offer likely to follow and if that happens will the promoters tender in that?
The promoters definitely would not be tendering into the open offer, if that happens. Still early to talk about what the structure of the transaction is going to be. If the strategic partner wishes to have more than 21 percent stake or 20 percent stake and wishes to make an open offer, we will accept that.
A view on the structure itself. You said you are open to them buying stake in your step down subsidiary, which is ZEE5 or Zee. What kind of probability do you assign to these possibilities?
If it is a tech company, definitely the possibilities are large. If it’s a pure content company, maybe restrictive but we are open to any kind of structuring that is comfortable to both us and to the strategic partner from a long-term perspective.
How do you see Zee after it has got that strategic partner? Will it be something like Amazon Prime or like Netflix, will it be something more than all these. Do you see a group like Rupert Murdoch. What is the end vision?
I think the end vision is to be truly a media conglomerate from the emerging markets catering to the entertainment world and not just to the South Asian diaspora across the world.
So you see yourself as both in content creation, content distribution and beyond television into the entire space of technology? Is that the vision?
Absolutely, that is what it is all about going forward.
Few days back you were pretty bullish on the prospects for ZEE5, the prospects for ad revenue, for prospects of the business in general. What suddenly happened during the Diwali weekend that took place when the family sat down and decided strategy?
Nothing changed. The plans for ZEE5, the plans for Zee Entertainment stand intact; they stand to grow as is for us. We will continue to invest behind ZEE5, as we had talked about, but that is a strategy that is focused around the South Asian diaspora across the world. We truly believe that our global aspirations go beyond the South Asian diaspora and that is what has changed and that is where the family buy-in has come in and, therefore, we have chosen to make the announcement. Twenty days back I was talking about the results of Zee Entertainment, which in its standalone basis, will continue as it is.
How would you reassure them that the value of their share is going to only increase by March or April when the deal is struck?
I am still invested in the business and if I did not think that the value would increase, I would be selling 100 percent of my stock and not just up to 50 percent of it. I still believe that there is a lot of value to be built in Zee Entertainment as a company as a whole while it could be part of a larger group or even as on its own, we will be continuing to build value through ZEE5 strategy through the film production and distribution strategy and our live entertainment business strategy.