Proxy advisory firms such as InGovern and SES remain unconvinced about the Goenka family’s plan to raise their shareholding in Zee after its failed merger with Sony. The Goenkas, who are promoters of Zee, hold 3.99% in the company, while the balance is owned by public shareholders including mutual funds, insurance companies and foreign portfolio investors.
On Monday, Subhash Chandra, who is the chairman emeritus at Zee, said in media interviews that the promoter family would look to raise its stake by 5% in the company, as part of a longer-term plan to increase its shareholding to 26% in Zee.
Based on Zee’s closing market capitalisation of Rs 15,521.99 crore on Monday, the value of a 5% stake would work out to Rs 776 crore. The stock went down 1.01% to Rs 161.60 is a rising market Chandra has said that he will not raise debt, but tap family members, including his younger son Amit Goenka, a non-resident Indian. Amit Goenka was under regulatory probe last year for alleged fund diversion at Shirpur Gold Refinery, an Essel group company. At Zee, he handled the firm’s technology and digital businesses including Zee5, the company’s OTT platform.
“I am not sure how the promoters at Zee will put this plan of action (of raising their stake) into motion. And who will give them the funds to do so after the company’s failed merger with Sony. It is also unclear why the promoter family did not raise its stake in Zee earlier, when the opportunity always existed to do so,” says Shriram Subramanian, founder and MD at InGovern.
While J N Gupta, founder and MD of Stakeholders Empowerment Services (SES), says that the promoters of a firm can raise their stake either through a creeping acquisition or preferential allotment of shares, he says he is unclear how the Goenkas will do it.
“They have only stated their intent at this point. Market participants will want to know how the promoter family will raise their stake in Zee after all that has happened,” Gupta said.
Zee has moved the National Company Law Tribunal (NCLT) against Sony in a bid to enforce the merger, which was approved by the tribunal in August last year. On Monday, Chandra claimed that Zee had met all the terms of the proposed merger and that it was Sony’s strategy all along to engage with Zee and eventually withdraw from the proposed merger.
In its FY23 Annual Report, Zee said that it had spent Rs 176.2 crore towards merger-related expenses including compliance and other charges. Recent regulatory filings by the company show that in the first half of the current financial year (FY24), Zee had spent Rs 190.39 crore towards merger-related expenditure. When combined with the Rs 7.2 crore incurred in FY22, the total bill on merger costs works out to nearly Rs 374 crore in two-and-a-half years for the media company.
Zee is likely to raise these matters at the NCLT as it seeks to enforce the merger, legal experts said. Chandra said that he was considering a criminal case against Sony for walking away from the proposed merger. Sony has already demanded a termination fee of $90 million from Zee citing alleged breaches by the company.