Subhash Chandra’s son Punit Goenka, who is at the helm of affairs at Zee Entertainment Enterprises (ZEEL), is expected to steer the company through troubled waters. With the promoter stake of ZEEL going down from 44% to 5% recently, the media company has been in the public eye, particularly after the resultant departure of its founder Subhash Chandra from the company’s board as chairman in line with Sebi guidelines. Chandra continues to be non-executive director on the board. These developments are after a clutch of investors helped the promoters pay debt to the tune of Rs 11,000 crore last month.
This has now placed the company chiefly in the hands of Chandra’s son Punit Goenka, as it transitions into an institutionally managed one. Goenka continues as the MD and CEO at ZEEL.
Rohit Dokania, vice-president, research, IDFC Securities, says, “Goenka is expected to continue to lead the entertainment business of Zee as stock market participants are in favour of his leadership. Under him, the company’s TV viewership market share has gone up from 12-18.5% in the last six-seven years.”
Industry experts say Goenka is now left with the task of ensuring that the company does not lose more stake to investors.
“A promoter’s interest in the company should ideally not be as low as 5%. Currently, this stake is at a very precarious level,” points out Paritosh Joshi, media consultant and principal, Provocateur Advisory.
Over the next fiscal, analysts say the company could possibly work towards consolidation of the business and rationalise its offerings. “It is possible that if Goenka sees there are some parts of the portfolio that are not performing, he might drop those peripheral businesses,” says Joshi. In the past, ZEEL’s parent company Essel Group had exited non-performing businesses, including DNA’s print edition. Zee had also hived off the TEN Sports portfolio to Sony in 2017.
The ZEEL umbrella currently includes the company’s domestic and international broadcast businesses; movies and music verticals Zee Studios and Zee Music, respectively; live events arms — Zee Live and Zee Events; and digital offerings Zee5 and India.com.
The economic slowdown and low GDP growth could possibly impact Zee’s business over the next financial year. In the second quarter of the current fiscal, ZEEL’s consolidated advertising revenue grew by 1.2% year-on-year to Rs 1,224.7 crore, as per ZEEL’s Q2 FY20 earnings release. The company’s domestic advertising revenue grew by merely 1.4% year-on-year to touch Rs 1,169 crore.
Therefore, growing the digital arm of the business — Zee5 — is probably a top priority for the company at this point. The company has been entering into multiple partnerships to strengthen the distribution of its digital content and is investing in developing a library of original content.
“The faith that investors have in Goenka is the biggest positive outcome of the stake sale,” says Harish Bijoor, brand strategy specialist and founder of Harish Bijoor Consults. He is of the opinion that maintaining the top leadership with Goenka at the helm instills confidence in advertisers who are a large contributor to ZEEL’s revenue.
Media analysts feel that from a public perception point of view, Zee’s stake sale is not expected to affect the company’s day-to-day business or viewership. That said, advertiser confidence in the company will likely need to be reaffirmed, Bijoor says. “Brands not only want to be right, but also look right. Zee Entertainment could benefit from reiterating to its stakeholders that the company is committed to being transparent,” he adds.
Experts say that investors are likely to scrutinise Zee’s transactions and activities, going forward. In fact, Zee has already initiated an audit of related party transactions and corporate governance standards, post the allegations made by two independent directors who recently resigned from their positions.
