There seems to be no end to troubles at Zee Entertainment. Two of the three independent directors who resigned from the board of Zee last week have cited corporate governance concerns for their departure from the company.
Subodh Kumar and Neharika Vohra, who tendered their resignations on November 22, listed out seven reasons for their resignations, most of which pertain to governance practices of the management, chiefly related-party transactions (RPTs).
For instance, a case has been cited of a subsidiary firm of Zee guaranteeing repayment of a bank loan to a related party. The other objection raised by the duo was regarding laxity in spending of CSR (corporate social responsibility) amounts given to a related party foundation/trust.
The management of Zee has also seemingly not acted on a large outstanding from Dish TV and Siticable for the content supplied by Zee. The independent directors also raised concerns over a letter written by a portfolio management services entity over build up of related party balances and advances for content acquisition.
Questions were also raised on film advances given in 2018-19 to the tune of Rs 2,200 crore.
The management of Zee has also been accused of not taking legal action when a scheduled bank appropriated Rs 200 crore of Zee's fixed deposits towards promoter loans, and non implementation of certain decisions of the Board meeting held on October 17, 2019, relating to treasury operations.
The media and entertainment major, on its part, has responded to each of the reasons. The company has said it had disclosed the information regarding film advances in the annual report and analyst interactions, the CSR funds have been allocated in compliance with the law, audit of the issues pertaining to related party transactions and advances is underway by auditors, among others.
Meanwhile, Sunil Sharma in his resignation letter dated November 24 said subsequent to sale of shares by the promoter group, and reconstitution of the board, he has tendered his resignation. Last Monday Subhash Chandra, the founder of Zee Entertainment Enterprises, stepped down as chairman of the company after the promoter group sold a majority of its pledged stake in the company to a clutch of marquee investors from India and overseas. The board accepted Chandra's resignation but stated it is yet to appoint a new chairman.
The company also announced appointment of R Gopalan, Surendra Singh and Aparajita Jain as the three new independent directors. These three, the company stated, have replaced Neharika Vora, Sunil Sharma and Subodh Kumar on the board of Zee. The new board of the media and entertainment major will now have six independent directors and two members from the Essel Group.
Last week, promoters of Zee sold majority stake in Zee Entertainment in order to repay lenders. The debt-laden Essel Group had pledged over 90% promoter stake in Zee Entertainment. Earlier this year, Zee had sold 11% stake in Zee to Invesco Oppenheimer, which is now the largest shareholder in Zee while Subhash Chandra will retain close to 5% stake in the company.
On Wednesday, shares of Zee Entertainment closed at `319.5, down 0.06% from its previous close on the Nifty.