I have been wanting to write this article for nearly three weeks now, however, I held on to my counsel in the interest of maintaining a balanced approach – waiting for the situation to fold out completely and then lay out a detailed perspective. But with new and incongruous facts emerging each day, I could not stop myself from writing this today. I have been a student of media for 21 years now: learning, observing and writing on Indian media for over two decades.
I co-founded exchange4media in 2000, and acquired BW Businessworld eight years ago. The large part of my career has been focused on watching the Indian media and the entertainment industry at close quarters. I have had the good fortune of knowing and understanding the nature of this business first-hand through interactions with all leading stakeholders. I have had close engagements, professional relationships and deep friendships with media owners, CEOs & large investors. Therefore, I am confident that what I say with a fair amount of conviction in this article is borne out of my deep-rooted knowledge and understanding of this space.
The Navratris are in progress as I write this, and as a pious Hindu, I believe in the trinity of our Gods – Lord Brahma, the creator; Lord Vishnu, the preserver; and Lord Shiva, the destroyer. The ongoing fight between Zee and a section of its investors fronted by Invesco, to my mind, has an equivalence with this trinity in its own earthly manner.
In this ongoing fight, I see Dr Subhash Chandra, as the maverick creator (of the brand behemoth Zee), his son, the Zee MD & CEO of over a decade, Punit Goenka as the preserver of the stupendous shareholder wealth the conglomerate has created, and counterintuitive one of the shareholders, Invesco as the destroyer of the shareholder value. This emerges mainly from the startling revelation that the key driving factor behind this rigmarole is Invesco’s quest to bring in a large conglomerate to acquire and merge Zee into its existing media holding vehicle. What has got tongues wagging instantly is the fact that such a deal was undervaluing Zee substantively – a fact that has been subsequently proven by the valuation accorded to the media giant in the deal with Sony. Why was Invesco doing this Tandav? One can argue that to create afresh, you need to do creative destruction. But the destruction in question would have created value only for new shareholders while leaving the existing shareholders with lost value.
In the overall context, another question also begs answering: What is keeping Zee stock prices low with downward pressure when in fact its financial performance continues to be consistently good, in a market that has been exuberant, to the extent that it has grown to 2X in the recent past? Who is instrumental in keeping this? What are the factors at play leading to this low stock price? Who does it help and who does it harm?
The key facts that need to be kept in mind are:
• The deal was initiated by Invesco, not Zee.
• Punit Goenka was proposed to be the MD & CEO of the merged entity in that case as well. So why the about turn now that an even better deal providing greater value to shareholders has been proposed?
• That deal guaranteed 7-8% shares in the new merged entity to the promoter group. So why is Invesco questioning anti-dilution protection to the promoters in the Sony deal?
• It is a known fact that Punit Goenka represents Dr Subhash Chandra in the larger scheme of things at Zee – and the company has been performing well for years. It seems, however, that since he is not going ahead with the preferred deal of this particular investor, the intent of the proposal is to remove him and bring multiple new Directors on board to swing the deal.
• In the greater context, the question arises as to why Invesco failed to disclose a deal with another large business group as the driver for this ugly public corporate battle. To the general observer, it appears now that the allegations being made by Invesco on paper are a smokescreen for their own vested narrow interests.
• The board functions as an entity, and includes nominees of Invesco as well. So in the absence of any observations from their own nominees during board meetings over the years to the same effect, does Invesco’s selective targeting of the nominees of just Indian promoters stand the test of propriety?
While this does give, I hope, a differentiated perspective to the situation, I also believe it is important to lay down my thoughts on the core matter at hand.
I am of the firm view that Punit Goenka should remain the MD & CEO of the merged entity. Here are my 8 reasons why:
1. Punit is an ideal foil to his father, Dr Subhash Chandra. Anyone who has worked with Punit Goenka will tell you that while Dr Subhash Chandra is the maverick creator and kind man who is humane in his approach, Punit, while having all the great qualities of his father, also has a very logical, dispassionate and business-like approach. He has the confidence of the shareholders, employees, advertisers and content creators. The media business is all about people – and under a leader like Punit Goenka, the business can only grow.
2. As MD & CEO, he has been extremely successful in enhancing the company’s performance and has persistently delivered results.
3. While the point is partially covered above, it is important to highlight especially that the employees love him – junior, mid-level or senior. That is critical to an organisation’s success.
4. He continues to attract top notch talent – and while that may not be a quality only he has, for an organisation of the scale of Zee, to be able to draw in the right talent at the right time is a key factor in ensuring stability and growth.
5. At exchange4media we saw his strengths – and an impeccable jury selected him seven years ago as the ‘Impact Person of the Year’. It is a testament to him and the award that he stands amongst other contemporary stalwarts such as Uday Shankar as a winner.
6. Punit Goenka has shown that he has the best interest of shareholders in his mind even in this ugly fight – the grace and resilience with which he has conducted himself has been a testament to this.
7. The entire media and entertainment industry has openly and wholeheartedly been in his corner as the battle has raged on, clearly demonstrating the respect and affection he commands.
8. Most importantly, Punit understands both technology and content deeply. This is not only a deadly combination, but it may just be the best skill set to have in today’s evolving media and entertainment landscape, especially when combined with all the other skills of the man.
If I had to buy shares in the merged entity as a retail investor, it could happen only if Punit Goenka continued to be the leader of the company, while representing a substantial stake of the promoter group led by Dr Subhash Chandra. What Dr Chandra created in these 25 years is a masterpiece; one that can only be recreated in the digital era by Punit Goenka. He has seen his father build Zee and learnt from him while at the same time he brings his own style, vision and transformational abilities to the table – a combination that to my mind is unmatched. He is truly the Preserver.