Subhash Chandra backs son Punit Goenka as troubles mount over failed Zee-Sony merger

Zee founder Subhash Chandra has openly backed his son and chief executive Punit Goenka as the company gets ready to legally challenge Sony Group on abandoning its merger plan with the Indian media conglomerate. 

The media mogul also disclosed plans to raise the family’s stake in Zee to 26% from the current 4% amid growing discussions that investors are trying to oust the Zee promoter family.  

Sony Group called off the merger of its India unit with Zee Entertainment Enterprises Ltd (Zee) last week over the role of Goenka in the merged entity after regulator Securities and Exchange Board of India (Sebi) launched a probe against him last year. 

In an interview with Mint, Chandra said Punit is “the right person” to lead Zee in the future as well. 

Noting that Zee Entertainment produces 50 hours of content daily across Hindi, regional, and ten international languages, Chandra told the newspaper that running the company is a complex business. 

He, however, maintained that there was no problem with Zee and added, “It (Zee Entertainment) is a profitable, zero-debt company.”

Firmly standing behind Punit Goenka, Chandra added that unlike what his investors feel, Sony would not agree to the merger even if the CEO steps aside.

Amid reports that investors are allegedly trying to oust the Zee promoter, Chandra told the daily that in a recently held board meeting, 38 lenders have agreed to give his family a year to pay back his loans. 

The family, Chandra claimed, has already repaid 92% of the lenders. 

Speaking about the aborted Sony merger, Chandra claimed that he learned about the issues in the merger only in the first week of December. 

Recalling that it took him three days to give his nod on the proposal of a merger with Sony in September 2021, Chandra said he went ahead assuming that Sony, a Japanese company, would allow Zee to continue to run as an Indian company and that the merger would be suitable for its shareholders, viewers, and other Zee stakeholders.

However, Sony was trying to drive the business from the back seat, Chandra said, and he only realized once he took stock of everything. 

Sony forced Zee to settle a few claims, including the Indian Performing Rights Society claim that the company would have otherwise challenged, he claimed, adding that it cost Zee ₹4 billion ($48 million) and impacted the company’s performance. 

On Sony asking Punit to step aside due to the Sebi probe, Chandra said the order was overturned by the Securities Appellate Tribunal (SAT) and the market regulator did not go to the Supreme Court to challenge it. 

“Punit was ready to step aside, but there must be certain safeguards,” Chandra added. 

He said that Sony is demanding a $90 million termination fee because they are going by the “premise that offense is the best defense.” 

On his strategy ahead, the former Essel Group chairman said he has advised his immediate and extended family to increase their shareholding in Zee without taking debt.