Nifty Media (a basket of stocks of Media companies), gave a spectacular return of ~27% within a week. Why this sudden interest, though?
Two stocks, bound by fate, together making up 34% of Nifty Media, are facing a similar trajectory.
Shareholders at Zee Enterprise Entertainment Ltd. and Dish TV India have taken it upon themselves to overthrow the management of their companies and reinstate a professional team. This move was cheered by one and all.
Rakesh Jhunjhunwala picked up 5 million shares and BofA Securities bought 4.86 million shares of Zee.
How did things come to this?
It all started in the 1960s. The journey of Zee Enterprise Entertainment Limited’s founder, Mr. Subhash Chandra’s is that of rags to riches. His family was into the polishing of rice and dal and an 18-year-old Subhash took it to great heights.
After having tasted success, he was convinced that he could do just about anything. And that’s how he forayed into packaging, leisure parks, and whatnot.
But the real eureka moment for Subhash came in 1992, as Zee TV was launched as the first private satellite TV channel in India.
This first was followed by many firsts. In 1993, Zee went public and became the first media company to offer shares to the public. In 2003, Zee launched India’s first DTH service: Dish TV.
Essel Group (parent company of Zee) was going strong. Riding this tiger of success, Subhash forayed into some more ventures, such as solar power, infrastructure, and even a cruise ship.
Sadly, these ventures kept running into the wall. Things would have been better if Subhash would have given up and stuck to his guns in the media. Instead, he kept taking loans (against his shareholding in Zee) with the hope of a turn-around. A classic case of sunk-cost fallacy, eh?
In 2019, when the repayment time came near, Subhash Chandran was neck-deep into troubles with no way out. He had to give up his shares and step down.
From 42% in December 2018, the promoter’s shareholding came down to 4% in December 2019.
Something similar was witnessed at Dish TV too. Promoter’s holding came down from 60.8% in December 2018 to a meager 5.9% in June 2021. It led to massive erosion in the stock prices of both companies.
When the loan was given, Dish TV was trading over Rs.70, and is currently trading around Rs.15. Similarly, Zee Entertainment was once trading around Rs.480 in 2019. The stock prices have been in a free-fall since the fiasco began and was languishing around only Rs.170 in August 2021.
But it still wasn’t the end of the road for Subhash Chandran’s family. Subhash’s son Punit Goenka continued to be the Managing Director and CEO of Zee Limited. With the onset of OTT, things were not going to be easy for them. Stock prices never recovered and the shareholders ran out of patience.
And that’s why top investors at Zee and Dish TV are demanding an Extraordinary General Meeting (EGM) for an overhaul of the management.
In both cases, some corporate governance (the rules and procedures on the basis of which the management runs the company for its shareholders) lapses have been noticed. And these lapses became the ground for the investors to eliminate the promoters.
Is there any last moment trick that Punit Goenka can pull out from his hat? What does the future hold for Zee?
Only time will tell…
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