Subhash Chandra has stepped down as the Chairman of Zee Entertainment with immediate effect. His resignation was accepted by the board of Zee Entertainment on Monday. He decided to resign to comply with the rule which mandates that Chairman of a company's board cannot be related to its Managing Director and Chief Executive Officer. Punit Goenka, the present MD & CEO of Zee Entertainment Enterprises, is the son of Subhash Chandra.
Subhash Chandra and Punit Goenka will remain on Zee Entertainment board as representatives of Essel Group. In a statement, the company stated that Chandra wished to step down from the board altogether, but other board members urged him to stay. He will now continue as a non-executive director.
"In light of the changes in shareholding, Mr. Subhash Chandra has expressed his intention to resign as Chairman of the Board with immediate effect," the company said in a regulatory filing. "The Board accepted his resignation and noted that this is in line with the requirements of Regulation 17 (lB) of SEBI Listing Regulations, which inter alia mandates that the Chairperson of the Board shall not be related to the Managing Director or the Chief Executive Officer of the Company. He will remain as Non-Executive Director of the Company."
The board also appointed three new independent directors, namely R Gopalan, Surendra Singh and Aprajita Jain, in lieu of two independent and one nominee Director of Essel Group. The reconstructed board now consists of six independent directors and two members from the Essel Group. The appointments will have to be approved by shareholders.
"The reconstitution of the board was to strengthen and induct independent members with varied experiences to build value and provide a strong signal to the existing and new institutional investors who have recently reposed their faith in the intrinsic value of the Company, by investing Rs 4,770 Crore," the company said in its statement.
Last week, Subhash Chandra-led Essel Group, the promoter of Zee Entertainment Enterprises, decided to sell up to 16.5 per cent stake in the company to financial investors. The stake sale is meant to repay loan obligations to certain lenders of the group for whose benefit such shares are currently encumbered (and who have consented to such share sale by the group).
Subhash Chandra along with his family owes about Rs 7,000 crore to the domestic lenders, including mutual funds, and Russia's state-backed lender VTB. The money from the stake sale will directly go to lenders. Apart from this, the promoters are also selling infrastructure and solar power assets to raise money to repay debts.
Following the transactions, the overall holdings of promoters will come down to 5 per cent, out of which encumbered holdings of the group will reduce to 1.1 per cent of Zee Entertainment.