Essel Group chairman Subhash Chandratold ET he’s confident of being able to meet the September 30 deadline on repaying lenders. He said Zee Entertainment EnterprisesNSE 5.03 % (ZEE) has five suitors — from India to Japan, Europe and the US. “You might get surprised with the names,” he said in the first interview after his letter to stakeholders acknowledging commercial missteps in the wake of the January stock collapse. He also said that Essel will repay every rupee of the group’s Rs 17,174-crore debt. Edited excerpts:
What is the progress on the stake sale in ZEE? Will it happen within the September 30 deadline agreed upon by the lenders?
When we started the process, Goldman Sachs and LionTree presented the case to about 12-14 suitors in December 2018. From those, we have come down to two potential players. But apart from those two, we now have three new players who have joined the dialogues, who have approached us directly without routing it through the bankers. Big names have been doing the rounds, but at this stage I will not be confirming or denying any names. Now from these five shortlisted players, I sincerely believe that by end of April or first week of May, we should get non-binding term sheets.
‘Not Averse to any Financial Investor’
Lenders have given us time till September 30, and I’m confident that the deal should very well happen by then. Our core objective is to come out clean from this by repaying everyone’s money and that too happily.
Why are these players keen on ZEE?
Every shortlisted player has a different reason to deal with us. But the common thread is that all of them want to have a direct access to 1.4 billion people.
Some value our expertise in creating great content at reasonable cost, not just in Indian languages but even in foreign languages, while somebody wants to know more about and enter the Indian market. For them, there is no better platform than ZEE to get deeper insights into Indian people.
Some want to marry content with ecommerce. Everyone has different and unique reasons to get into the deal. Some wish to take complete control, some are fine with 50%, and some are even fine with lesser stake. I hope there is a good and healthy competitive tension between the final two, since that will only yield a higher value.
Do you also have any criteria of your own for selection of the prospective buyer?
Our desire is definitely to choose someone for values rather than for valuations. The player should add value to our stakeholders and help ZEE to grow bigger, globally—a suitor who values India and Indian traditions will certainly be chosen and more so the one who is pure in the overall business approach, without any vested interests.
From the five shortlisted players, are all international, or are there any domestic ones also?
The shortlisted ones range from Japan to India to Europe to the US – including West Coast and East Coast. You might get surprised with the names.
Earlier you were looking at strategic partners. Now with the changed scenario, are you also looking at financial investors?
Today, even the PE firms are getting very aggressive. Let’s see how this shapes up. Like I said, our objective is to arrive at a repayment to all lenders, so it really doesn’t matter, as long as the partner is in to add value to the business. While I will not get into the details at this stage, we are not averse to any financial investor.
Is Sony definitely out?
I would maintain the same stance. One really can’t say anything at this stage.
Which other businesses of the Essel Group are on the block?
In case of infra businesses, we are trying to complete the projects and sell the same to get the right value, post which, Essel Infra will remain as a platform, which has been built having a potential to bid a single tender for Rs 30,000 crore. We will then take a final call if we should sell the platform also or not.
Other non-core businesses like Essel Finance and mutual funds will also be sold. I am also looking at selling some of my private properties. I do not feel any shame in selling properties to help me repay the money.
Is there any possibility that if other businesses are sold, the requirement of selling the ZEE stake might not be felt?
No. Even if the other businesses do generate a good sum, we will need to sell some stake in ZEE to be able to cover the debts.
You said people are interested in buying over 50% stake. How flexible are you on this as of now?
It all depends on the respective business preferences of the shortlisted players. It is (more) complicated than it seems and we will collectively arrive at a decision which is best suited for the company and for its stakeholders.
A lot has been written about Essel Group’s current financial situation. How do you see these concerns?
A lot of businesses are under stress across the nation, but I feel Essel Group is different from others. Irrespective of whatever is being written about our companies since January 25 – when the stocks fell – we are not reacting to it. In reality, business is running as usual with the operating companies continuing to show exceptional performance. At ZEE we continue to give double-digit growth and there is no stress. A few projects in the infrastructure business surely faced hindrances. But we have built strong businesses and not taken any favours from any political party.
My sons — Punit and Amit — are performing much better than I used to, which is the biggest gratification for me as a father and founder. Also, our focus continues to be on creating value for our shareholders. So from the outside, you might perceive that the group is under stress, but you speak to our employees, they will vouch for the smooth functioning.
As chairman of the group, how do you plan to steer it out of the current situation?
Over the 90 years of the Essel Group’s journey, this is the third downturn I am seeing — first was in 1967, then in 2008 and now the current one. I firmly believe that because we remained focused, we could overcome from the so-called valleys of death and I am 100% confident that this time also we will emerge as strongly as we did previously.
In the last 50 years alone, we have paid Rs 39,000 crore of interest to the banking system. This was one of the cost items always. Compared to that, the current debt is a much lesser amount.
We have a plan in place. If you look at the sale of assets of our infra business, I believe it will be completed between July and September. With that Rs 15,000-16,000-crore debt of operating companies and Rs 3,000 crore of corporate debt will get cleared off. So overall about Rs 20,000 crore of debt will easily get wiped off. Rest will be taken care of by the stake sale in ZEE.
Is it right to say that it was the debt burden that prompted you to announce intention of selling a stake in ZEE in November 2018?
The basis for the stake sale decision in ZEE was our discussion with a technology company, which showcased its abilities to help us take ZEE to a global level. Of course we were mindful of the debt levels at the promoter level, but addressing that was secondary.
Now let me put it this way. If the IL&FS (Infrastructure Leasing & Financial Services) issue would not have happened and the overall NBFC (non-banking finance company) industry wouldn’t have got into the difficult stages, our debt levels probably would have gone unnoticed.
Having said that, we had a clear visibility on the repayment part with our infra and other assets. Also, this doesn’t mean we were stressed as whatever loans against shares we had taken, the same were getting renewed.
However, now is not the time to look at the past and it is important to accept the same. One day suddenly we experienced the drop in the stock price, which nobody could have managed. I am glad that we have by now more or less forgotten those negative forces since we only met positivity after that episode, especially after my open letter and meetings with the lenders.
What prompted you to issue the open letter accepting your commercial mistakes? In hindsight, was it the right move?
On January 25, when our stocks tanked, I, being a Vipassana student, stayed calm in my room and started drafting the letter. The team was surely reluctant, but I said no, I must write what is true and correct. You can accuse me of wrong commercial decisions, but no one can accuse me of keeping someone’s single rupee. People may say anything about me, but I am sure about my commitment and confident to repay each and every lender. That’s why even now I get a sound sleep.
Recently, Kotak AMC blamed exposure to ZEE as the reason for not being able to meet fixed maturity plan (FMP) commitments to investors. Your view?
I am surprised why this Kotak AMC issue came up, despite their confirmation that they will support us till September 2019. They are very much a part of the overall consortium of lenders who have unanimously agreed and have given us time till September. Neither do I understand the reason why that came up, nor do I have any idea about their arrangement with their investors. If they have not paid their investors, I really cannot comment on the same. HDFC on the other hand reinforced the fact that they have earned so much from the group, and if there is a penalty which in case they might face, they will pay it off, valuing our overall business relations. So each banker has a different way of operating. But I will leave it at that.
What do you see as a trend for media, going forward?
Content creation will remain as the basic core for the media business. Content will be platform-agnostic and innovations will continue. Your serials will have some scenes which will have the potential to take you into a virtual reality zone. The screens will become a marketplace eventually, which will have the potential to have ecommerce, medical help, communication, designing, presentations, trial of new clothes onscreen, etc.