‘It’s your money at stake’: Subhash Chandra asks ZEEL shareholders to trust themselves over proxy firms

During a call with the investors and analysts on Thursday, Chandra said, “Our learned proxy advisors, and sometimes even some analysts, have their own reasons and points of view when they advise shareholders to vote for or against a resolution”

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Lalit Kumar
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(L-R) A file photo of Amit Goenka, Subhash Chandra and Punit Goenka

(L-R) A file photo of Amit Goenka, Subhash Chandra and Punit Goenka

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New Delhi: The chairman emeritus of Zee Entertainment Enterprise (ZEEL), Subhash Chandra, on July 3, urged shareholders and investors to make their own decisions, rather than going by the recommendations of the proxy advisors. 

During a call with the investors and analysts on Thursday, Chandra said, “Our learned proxy advisors, and sometimes even some analysts, have their own reasons and points of view when they advise shareholders to vote for or against a resolution. At times, their personal bias may influence their recommendations.”

He further requested investors to make their own decisions, since it's their money at stake. “But ultimately, nothing is better than making your own decision in your own interest, because you are the investor and it is your money at stake. The proxy advisor has not invested their money; you have.”

The comments are being made against the backdrop of ZEEL’s announcement of the issue of up to 16.95  crore fully convertible warrants to entities belonging to the promoter group on a preferential basis. The move, which will see promoters infuse Rs 2,237.44 crore at Rs 132 per warrant, will increase the Chandra-led Zee promoter group’s stake in the company to 18.39% from the existing 3.99%, subject to shareholder approval.

If shareholders approve the resolution at the upcoming annual general meeting, promoters will initially pay 25% of the amount, Rs 559.4 crore, at the time of allotment. The balance of Rs 1,679.58 crore will be brought in upon the conversion of warrants within 18 months, in line with SEBI’s ICDR Regulations.

However, Chandra assured investors that the promoters intend to accelerate this timeline. “Regarding the question of warrants, I can assure you that we will not wait for the entire 18-month period. We will bring in the remaining funds as soon as possible, at the earliest opportunity,” he said.

He further clarified, as per reports, that the company would neither raise debt nor pledge shares to fund this infusion.

Chandra’s call to disregard proxy advisors follows their recent opposition to the promoter-led infusion. All three of India’s leading proxy advisory firms - Stakeholders Empowerment Services (SES), InGovern, and Institutional Investor Advisory Services (IiAS) - have raised strong objections to the proposal.

SES, in its submission, had questioned why Zee did not consider alternative fundraising options such as a qualified institutional placement or a rights issue, both of which would have been more equitable and transparent, giving all shareholders an opportunity to participate and preserving investor confidence.

Vikas Somani, Chief - Strategy and Investor Relations, explained three key reasons why ZEEL resorted to resistance for rights issues. 

“Firstly, rights issues are typically done at a discount, and sometimes the discount needs to be quite deep. We did not want to reset the share price further downward from where it was at that time.” 

“Secondly, there was uncertainty about how the capital markets would respond to any such issuance, whether a rights issue or a QIP, given the general noise and sentiment surrounding the company. We cannot deny or shy away from the fact that, rightly or wrongly, there has been some negative narrative around our company, which could have impacted market reception.”

“Thirdly, even if we had gone ahead with a rights issue and if it had not been fully subscribed, the unsubscribed portion would have been picked up by the promoters at that discounted price. So effectively, the promoters would have ended up acquiring shares at a much lower price.” 

Instead, the company went with the alternative of a preferential issue to the promoters at Rs 132 per share. 

“This was at a significant premium, both over the regulatory floor price and over the prevailing market price of Rs 106, which was when the promoters had first expressed their desire and proposal to the board,” Somani said. 

The investor call, as Chandra pointed out, was part of Zee’s effort to be “more transparent and much more open to the shareholders.” 

However, given that it was held just days ahead of the crucial annual general meeting on July 10, the timing appeared strategic. When questioned about this, Chandra clarified that the company intends to host such calls with shareholders and investors every quarter.

The conspicuous absence of Managing Director and Chief Executive Officer Punit Goenka from the call did not go unnoticed. 

In response to shareholder queries, the company cited “some very urgent unscheduled travel plans, which could not be cancelled.”

ZEEL Punit Goenka Subhash Chandra investor shareholder
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