Punit Goenka, the 43-year-old Managing Director and CEO of Zee Entertainment, is fondly called 'Mr Positive' by his colleagues. Goenka has lived up to his positive and calm image even during the toughest phase of his professional life when he has to repay a Rs 6,776 crore debt by September 30. The Zee promoters (part of Essel Group) recently sold 11 per cent of their stake at Rs 4,224 crore to financial investor Invesco Oppenheimer, in a bid to repay their Rs11,000 crore debt. "It is life as usual," smiles Goenka, as he reiterates that he is confident of repaying his debt by September 30. In conversation with BT's Ajita Shashidhar, Goenka talks about how he has been approaching the debt crisis and his plans after he gets done with the repayment.
Last few months must have been a huge roller coaster ride for you, not just from a business point of view but also emotionally. What did you tell yourself?
It's not so much emotional for me, (but) it's been a learning process. It is something that I need to learn from, that is how I am looking at it. I need to come out of it and that's what I am doing.
Have you been spending long hours at work meeting prospective buyers?
It's the same as before. Nothing has changed. Earlier, I just had the company to run, now debt repayment has become the second part of my job. The number of hours that I put in at work is actually the same. It's not changed much.
What are the lessons you have learnt in the last few months, ever since the debt crisis broke out?
The two things I have learnt are that every opportunity needs to be studied thoroughly before one commits to it, and one needs to know how much to commit and how much not to. Secondly, resolution of issues needs to be handled piece by piece rather than finding an overnight solution. Overnight solutions don't work.
Now that you have sold the majority stake in your best performing asset, which is Zee Entertainment, what do you see as the future of this company?
Nothing changes in Zee Entertainment. It has been business as usual, apart from the fact that the promoters won't own as much of the stake as they did in the past. The company has been functioning as it is, safe from the economic issues that we are facing in the short term. The company is poised to do well going forward as well. We will continue investments in Zee5; we are going to continue investments in the linear business too. There is still a lot of growth left in the media sector as you would know.
Your team at Zee must have been feeling uncertain amidst all the chatter about the debt crisis? What do you tell them?
I keep telling my team at Zee that it is business as usual. Don't worry about what happens, whether it's going to be the Essel family or somebody else who will own the company; nothing changes for the employees. I tell my team that we will find a solution to this crisis, we will move on from here and we will rebuild the group as we want to. We will focus on verticals that we understand best, which is obviously media and entertainment, and not look at diversifying too aggressively until we have the resources with us.
I am told you have recently started an employee engagement initiative called PG (Punit Goenka) Upfront. What kind of questions are your employees asking?
One of the smartest questions that I got on PG Upfront was from a team member in Bengaluru, who asked me that with (Invesco) Oppenheimer coming in, will we be able to leverage their other investments in media to work together. I said that there will certainly be a time when we could discuss that with Oppenheimer. It may not be right now, but in due course, we definitely will. The other question I keep getting asked is if I will be around. I tell them not to worry, I am right here, running the company. Whatever decision I take will be in the best interest of the people and the company.
In November 2018, you had announced your intent to sell a part of your stake to a global strategic partner, but you ended up selling stake to a financial investor. You have said that you were forced to go with an investor, as the strategic partner was taking time and you had a deadline to meet. In your heart, would you have preferred a strategic partner to a financial investor?
We would have certainly preferred a strategic partner, had they met the timelines that the lenders had set for us. In fact, back in November, I was certain that I would get a strategic partner. But January 25 (when the Essel Group's debt crisis came out in the open and share prices of their group companies tanked) changed all that. The intent changed from bringing a strategic investor into the company to solving the debt issue for the family. That issue took precedence over what needs to be done. Therefore, the decisions had to be taken accordingly.
So, given a choice would you have preferred a strategic partner?
Absolutely. I waited till July 31, till the last date, to make the announcement (Sony Pictures and a consortium led by Comcast are known to have been in the race to invest in Zee Entertainment). I had the deal with Oppenheimer on July 23, when I announced it in my results call. I still gave it seven days before I took the decision. It was not an easy decision to take.
What would a strategic investor bring to the table? Would that have led to your exit from the company?
It may have involved our exit eventually as the promoter of the company. That intent was tabled by them even before we started discussions with them and I had said it's fine, as long as it solves our issue and within the deadline that is set by the lenders. The priority for the family was to get rid of the debt. But even if we would have exited Zee, we would still be left with enough assets in the media and entertainment sector. Be it Dish, Siti or Zee Learn, all of them are pretty large businesses.
How would a strategic partner have helped the business?
It would have taken us from being an India centric business to a global media and entertainment powerhouse. Not that we couldn't have done it on our own, but it would have taken longer. Our dream of Zee being the first media powerhouse from the emerging markets would have been realised.
After the Oppenheimer deal, how does your ability to take strategic decisions change?
It doesn't change. It's still in the best interest of the company and the business. Whether I am at 42 per cent or 14 per cent (stake) doesn't make any difference.
So, you are open to diluting more stake in Zee if your other deals don't work out?
That's why I said 14 per cent. My objective is to build the 14 per cent value back to 42 per cent value and, therefore, I have to do what is in the interest of the company.
Your lenders have given you a September 30 deadline to repay your debts. In case you are not able to meet the deadline, what would be the course of action?
In the worst case scenario, I will dilute the Zee stake and meet the deadline. There is no question of me not meeting the deadline. The July 31 deadline was etched in stone, the September 30 deadline is also etched in stone. Till date, I have never failed to meet deadlines. Hopefully, I will not fail to meet the deadline this time also.
What went wrong? When we look at the company level debt in some of the listed companies, you seem to be fine. When did you get to know that you were in trouble?
We got to know of the signs last year itself. The problem was nothing but over-leveraging, which happened when we bought the asset from Videocon (the DTH business), and some of the investments in the infrastructure business didn't pan out the way they were supposed to. Therefore, we were continuously pumping in capital from family resources. It's a double edged sword. There will come a time when you can't do it anymore, and things will go southwards. We realised that early enough and we had started the process (of debt reduction) in November itself for Zee Entertainment. We had started the process for our infrastructure assets even before that, but January 25 changed all that because it became public knowledge. We were negotiating with practically both hands tied behind our back.
Has the current state of the economy and the liquidity crisis made things more difficult?
Of course, it has. That's where it all started. We didn't get debt rollover and that was definitely the cause of it.
Where do you stand now in terms of selling your other assets?
We have roughly another Rs 6,000 crore to be paid off and I am pretty confident that with the non-media assets and the Zee stake sale, we should be able to meet that.
Can I get some more details?
The solar sale project deal is on the cards. We already have binding offers for three of our road projects. We are waiting for certain regulatory approvals. As soon as those are received, funding should come in. We have a non-binding deal on three other road assets, which are under due diligence. It's the same party that is buying the first three. These will give us significant liquidity.
The further stake sale at Zee will probably solve the issue. The Dish TV deal (Dish was supposed to be bought out by Airtel for Rs 5,000-odd crore but that is known to have hit a roadblock due to a fall in the former's stock prices) is a non-cash deal, so there will be no cash involved there. It is not going to help in the debt issue, but it will certainly re-rate the company.
After you settle your debts, what do you see yourself doing?
I will go back completely to running my business. Nothing else is on the cards for me. I will go back and start strategising as to what new I have to do at Zee, what more I can do to see the family stake go up again. In Zee, other verticals will be part of my day-to-day affairs - whether it is valuation of Dish TV or bringing Siti Cable out of the woods.
The last one year has been tumultuous for the media and entertainment industry at large. TRAI regulations created a fair bit of confusion, and then Star India's merger with Disney, which led to lay-offs and high-level exits. Now, Zee promoters are diluting their stake in the business. Don't all these events make the future of the Indian media and entertainment industry shaky?
The tariff order has been a positive for the industry, in my view. Our results speak of what the tariff order has done. As far as the Disney-Fox deal is concerned, there will be some turmoil till they find their feet. For Disney it's a new market. While they have had some presence in this country, it was not that significant. They have to understand the rules of the market, that's why you are seeing the turmoil happening. It will settle down. Under the leadership of Uday Shankar (President, The Walt Disney Company APAC, and Chairman, Star & Disney India) and Sanjay Gupta (Country Manager, Star & Disney India) things will be normal. They will continue to be our biggest competitor, and we respect them for that.
The Zee stake sale has nothing to do with the business. It's purely about promoters. It doesn't change the life of its people or its business. Things will go back to normal; this will be the new reality for us.
There is talk of OTT replacing linear television. Do you see that happening?
OTT replacing TV is not happening in our country any time soon.
But as an outsider I see more of content investment happening on Zee5 rather than the TV channels. Zee5 hoardings are very visible.
That's what the hoardings talk about. Somehow the perception of the financial markets is that if we don't put up hoardings, they don't believe that the business is doing well or that we are investing enough. According to me it's a complete waste of money putting up these hoardings. It's only being done for perception. Our investments are going equally into our linear business (and Zee5). This country will remain a TV and digital market despite the telcos announcement of fibre to home. We are talking about a country of 200 million TV households. It's not any time soon that these homes will upgrade; 65 per cent of our country still have CRTVs (cathode ray tube televisions). The CRTVs have no use of fibre, so if you don't upgrade your television, the fibre will not help you.
I think all this is a misnomer. What happens is we take what we see around us in our locality as the gospel truth of the country. It's far from that. I say this very often to my friends that the day you start enjoying my TV shows, I will be worried that I am doing something wrong, because I am not catering to you people, I am catering to the masses of this country. I tell them to watch Zee5 and not look at Zee TV. That's the way I look at the business. That's the way we look at segmenting the audience. Even on the OTT side, our country will be a hybrid model of advertising-driven and subscription-driven OTT. The advertising-driven OTT would be for the masses; it's not going to be for the premium segment. The same content that we put on television, we put there. The subscription-driven market will be for the premium audiences. So, it will be a TV and digital market.
So is the talk of TV viewership dipping a metro market scenario?
Even in metro markets, TV viewership is high. The average viewership in our country is 227 minutes per user per day. Whatever consumption we are seeing on OTT is incremental, because that audience was not on television. So, where is the question of cannibalising even in the metro markets. My household, which never watched linear TV, has started watching OTT. It is incremental viewership, it's not at the cost of anything. Flip to the international markets: I myself will shut down linear businesses in several markets and operate only through OTT.
Haven't you already started doing that? Which are the international markets where you have exited from linear TV?
Yes, we have already started doing it. It's not viable to reach a niche audience segment through traditional distribution. We have exited markets such as Australia and South East Asia. By end of this year, we will be exiting the UK and Europe.
The perception is that even in India very few single-TV households would invest in the next TV set. They would consume OTT content either on their phone or tablet.
For us that's not cannibalisation, it's incremental. The problem is when people start saying that TV will fall and OTT will gain. Let the media dark markets go straight to OTT, it doesn't matter; it's incremental viewership.
So will the English channels move to OTT, as the consumers of that genre have started consuming content digitally?
We can safely say that the first viewership shift will happen on the niche channels from television to OTT. The mass channels will be the last to go off.