We must take a relook at the way we are functioning, says Zee chairman

He believes that the time has come for the company to regain its former glory. Additionally, he states that the target of achieving an 18-20% Earnings before interest, taxes, depreciation, and amortization (Ebitda) margin by FY26, as set by MD and CEO Punit Goenka, is entirely feasible.

“The last two years of merger-related activities did not allow us to carry out certain essential tasks that we should have ideally accomplished… We incurred significant costs due to the merger, which could have been avoided. We spent close to ₹425 crore in merger-related expenses. Additionally, we had to close some channels that were generating revenues for us. In that sense, the merger prevented the company from realizing its full potential during the interim period,” Gopalan told Mint in an interview on Wednesday.

On January 22, SPNI sent a termination notice to ZEEL, calling off the merger that was announced more than two years ago, despite the merger receiving all regulatory approvals.

While SPNI cited unmet merger conditions, leadership issues also contributed to the fallout.

However, post-merger fallout, Gopalan and the company’s board have taken a more active role in the company’s operations, engaging with analysts and investors. The board has also established an Independent Investigation Committee (IIC) to probe allegations against the company, its Key Managerial Personnel (KMP), and its promoters.

“There were numerous rumours circulating in the public domain, which were incorrect, mischievous, and motivated. The best way to address these issues was to initiate an independent investigation into the allegations raised by regulatory agencies against promoters, KMPs, and the company itself,” Gopalan said. “The IIC has begun its work and will delve into the facts of the allegations, striving to provide clarity and transparency. While this process may not yield immediate results, it is crucial for enhancing organizational transparency and governance.”

Regarding Zee’s future, Gopalan emphasized the company’s strength in content creation and dissemination.

“We felt that there must be some kind of relook at the entire way we are functioning and the MD (Punit Goenka) has proposed a plan for this. We recognize the substantial potential of this organization and are committed to contributing towards its realization. To this end, we have introduced a new structure called Monthly Management Mentorships or 3M, which will drive changes in our business operations,” Gopalan stated.

The board will review various aspects such as plans, revenues, and costs. “We will explore how technology can enhance consumer understanding and content development, among other purposes. Our goal is to optimize existing resources and leverage new ones to achieve a higher level of performance. This is a comprehensive transformation that we must undertake,” he added.

Although the merger talks hampered growth, Gopalan reiterated the board’s keenness for the merger to proceed.

“We took several irreversible steps towards the merger’s completion, such as closing down certain operations. We actively supported and monitored the process, acting in good faith. If some argue that the closing conditions were not met, it does not reflect the reality. We were eager for the merger because it was in the shareholders’ interest,” he explained.

Currently, the company has petitioned the Mumbai bench of the National Company Law Tribunal (NCLT) to seek an order for the merger to proceed.

Gopalan clarified the rationale, stating that while there is interest from several potential partners, meaningful discussions cannot occur due to the pending legal matter. “We prefer a legal resolution. Ultimately, the decision rests with the NCLT,” he remarked.

Addressing concerns about the impending Sebi investigation against Goenka and succession planning, Gopalan emphasized the company’s resilience.

“In large organizations, succession planning is a natural step. We have implemented risk mitigation and business continuity plans to ensure uninterrupted operations. Zee’s human capital is highly competent, and any regulatory decision against one individual will not disrupt our functioning,” he assured.

Gopalan expressed confidence in achieving the ambitious Ebitda margin target amidst intensifying competition.

“Despite challenges, our debt-free balance sheet and cash generation potential position us well. We are known for our frugality and prudent cost structure. We believe that a revenue growth of 8-10% CAGR and an 18-20% Ebitda margin by FY26 are achievable,” he asserted. CAGR is compound annual growth rate.

Acknowledging the organizational restructuring necessitated by the merger preparation, Gopalan assured a streamlined approach.

“A certain amount of additional resources were planned. But today, we are looking at streamlining and de-layering the organization, optimizing the cost structure and making it lateral and simplified. To do that, we are looking at certain positions and businesses if we should continue or not and get into the overall cost structure of the business,” he added. “There may be some businesses which may not be performing or adding value. We will identify them and if they can’t be improved, we will look at options.”

Responding to queries about the board’s independence, Gopalan emphasized its autonomy.

“I joined in 2019-20, post which as a Board we have done a lot of work on reducing the related party transactions, both in volume and value. We have put in place policies and then seen that the policies are implemented in spirit and letter. We ensured that the receivables were brought down to the minimum level, which is consistent with the industry practice.”

He added that a lot of steps on optimization of resources and improving value and resources have been implemented. “The Board is trying its best to work for the shareholders to get their value enhanced. We will continue to do this, and the result of these efforts will enhance value and share price,” he concluded.

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Published: 21 Mar 2024, 03:00 AM IST