ZEEL Board assures appropriate steps on Sebi banning Subhash Chandra, Punit Goenka

New Delhi: Following markets regulator Sebi’s order barring Subhash Chandra and Punit Goenka from holding the position of a director or key managerial personnel in any listed company for siphoning off ZEEL funds, the Board of Directors of ZEEL Tuesday said that all the appropriate steps will be actioned as necessary, in order to ensure that the interest of the Company and all its valuable shareholders is kept at the forefront.

Also read: Subhash Chandra, Punit Goenka banned from holding directorial position for siphoning off ZEEL funds

“The Board of Directors of Zee Entertainment Enterprises Ltd. (ZEEL) has noted the interim ex-parte order issued by the Securities and Exchange Board of India (SEBI), with respect to Dr. Subhash Chandra and Mr. Punit Goenka,” the company said in a regulatory filing.

“The Board is currently in the process of reviewing the detailed order, and appropriate legal advice is being sought in order to take the next steps as required,” the company said adding that all the appropriate steps will be actioned as necessary, in order to ensure that the interest of the Company and all its valuable shareholders is kept at the forefront.

“The Board recognises the significant contribution made by Dr. Subhash Chandra as the founder of the Company and the growth and value generation-centric leadership showcased by Mr. Punit Goenka. The Board is confident that the Company will continue to achieve the set goals for the future and most above, create value for all stakeholders,” ZEEL said.

In its interim order, Sebi noted that Chandra and Goenka alienated the assets of ZEEL and other listed companies of Essel Group for the benefit of associate entities, which are owned and controlled by them.

The siphoning of funds appears to be a well-planned scheme since, in some instances, the layering of transactions involved using as many as 13 entities as pass-through entities within a short period of two days only, it added.

Sebi noted that the share price of ZEEL has come down from a high of close to Rs 600 per share to the current price of less than Rs 200 per share during the period FY 2018-19 to FY 2022-23. This erosion of wealth despite the company being so profitable and generating profit after tax consistently would lead to a conclusion that "all was not well with the company".

During this period, the promoter shareholding dropped from 41.62 per cent to the current level of 3.99 per cent.

Although the promoter family is only holding 3.99 per cent shares in ZEEL, Chandra and Goenka continue to be at the helm of affairs of ZEEL, the order noted.

"Noticees (Chandra and Goneka) created a façade through sham entries to misrepresent to the investors as well as the regulator that money had been returned by associate entities, whereas in reality, it was ZEEL's own funds which were rotated through multiple layers to finally end in ZEEL's account.

The noticees have attempted to ride piggyback on the success of ZEEL, the flagship company of Essel Group, to bankroll the associate entities, which are owned and controlled by them," Sebi said in its 17-page order.

The order came after Sebi conducted an examination in the wake of the resignation of two independent directors -- Sunil Kumar and Neharika Vohra -- of ZEEL in November 2019.

They had raised concerns over several issues, including the appropriation of certain Fixed Deposit (FD) of ZEEL by Yes Bank for squaring off loans of related entities of Essel Group. Vohra alleged that bank guarantees were given to a subsidiary without approval from ZEEL's board.

Sebi's investigation found that Chandra had provided a “Letter of Comfort” or LoC in September 2018, that was towards a Rs 200 crore loan outstanding from Essel Group Mobility.

Going by the letter, the Rs 200 crore FD available with Yes Bank from any of the Essel Group companies, including ZEEL, could be taken to settle it. Accordingly, Yes Bank had adjusted the loans of seven associate entities with this Rs 200 crore of ZEEL.

Later, it was found that these seven entities were owned or controlled by family members of Chandra and Goenka, Sebi noted.

When Sebi investigated further, ZEEL submitted that Rs 200 crore had been returned by the associate entities to ZEEL. Since Chandra and Goenka had signed the LoCs without consulting or informing the Board, both were found to have violated provisions of LODR (Listing Obligations and Disclosure Requirements) rules.

Accordingly, Sebi said, "Noticees shall cease to hold the position of a director or a Key Managerial Personnel in any listed company or its subsidiaries until further orders".