Zee Entertainment Enterprises : ZEEL investor conference call transcript

Zee Entertainment Enterprises Limited

INVESTOR CONFERENCE CALL

March 04, 2024

Transcript

Disclaimer: This transcript is provided without express or implied warranties of any kind and should be read in conjunction with the accompanying materials published by the company. The information contained in the transcript is a textual representation of the company's event and while efforts are made to provide an accurate transcription, there may be material errors, omissions, or inaccuracies in the reporting of the substance of the event. The transcript has been edited wherever required for clarity, correctness of data or transcription error. This document may contain "forward-looking statements" - that is, statements related to future, not past, events. In this context, forward-looking statements often address expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "should" or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. These uncertainties may cause actual future results to be materially different that those expressed in such forward- looking statements. The company does not undertake to update its forward-looking statements.

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Zee Entertainment Enterprises Limited, March 4, 2024

Moderator:	Ladies and Gentlemen, Good Day and Welcome to the Investor Conference Call of
	Zee Entertainment Enterprises Limited.
	As a reminder, all participant lines will be in the listen-only mode and there will be an
	opportunity for you to ask questions after the presentation concludes. Should you
	need assistance during the conference call, please signal an operator by pressing "*"
	then "0" on your touch tone telephone. Please note that this conference is being
	recorded.
	I now hand the conference over to Mr. Mahesh Pratap Singh - Head of Investor
	Relations, Zee Entertainment Enterprises Limited. Thank you and over to you, Sir!
Mahesh Pratap Singh:	Thanks, Sagar. Hello, everyone. Welcome to our investor conference call. The
	objective of this call is for the Board to interact with the investors, discuss key topics
	and address any concerns.
	Today we are joined by Mr. R. Gopalan - Chairperson of the Board and Independent
	Director. Along with Mr. Gopalan we also have Mr. Uttam Prakash Agrawal -
	Chairperson of the Audit Committee and Independent Director and Mr. Shishir
	Babubhai Desai - an Independent Director of the Board.
	We will start the call with opening remarks from Mr. Gopalan and we will
	subsequently open the floor for questions and answer sessions.
	Before we get started, let me remind everyone that some of the statements made or
	discussed on today's conference call will be forward looking in the nature and must
	be viewed in conjunction with risks and uncertainties we face. The Company does not
	undertake to update any of these forward-looking statements publicly.
	With that I will now hand the call over to Mr. Gopalan for his opening remarks. Mr.
	Chairman sir.
R. Gopalan:	Thank you Mahesh. Good evening to everyone. I hope all of you are doing well. Thank
	you for taking the time out today to join this call.
	The objective for today's call is for the Board to interact with all shareholders, provide
	our perspective on key topics, assure all of you that the Board of the Company is
	committed to safeguarding the interests of all stakeholders and address any
	concerns. The Board has also received some requests to meet with Independent
	Directors and while we are covering those, we also wanted to maintain the coverage
	of our engagement with all stakeholders to ensure consistent communication. We

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look forward to a constructive dialogue and are open for any suggestions and feedback.

Let me start first with how the Board sees ZEEL market positioning and its competitive strengths. ZEEL is a strategic asset and is well positioned India's M&E landscape. ZEEL has not only been a pioneer in the industry but has also run very frugal operations, consistently beating deep pocketed MNC players for several years. ZEEL has a strong brand, market position, debt free balance sheet and cash generating business. ZEEL has one of the richest content library in India with presence across the broad media value chain, including content production, broadcasting, streaming, movies and music. ZEEL's pan India presence across the language markets coupled with its content creation expertise at competitive cost and strong partnerships across the content ecosystem makes it a formidable player in the industry. ZEEL has also strong resonance and connect with global Asian diaspora as evident in ZEE5 being #1 south Asian platform across international markets.

Having said that, since 2020, ZEEL performance has been impacted due to industrywide macro slowdown, transitory issues and management bandwidth constraints with the merger activities. There have been primarily three issues which have impacted the performance since 2020. Firstly, Covid and related disruption. Second as ZEEL was recovering from COVID, industry was hit by macro headwinds like advertisement spending slowdown. And lastly through the last few years there have been intense and prolonged merger related activities which has taken time, energy and share of management bandwidth impacting operations and business. Hence in the Board's assessment, current softness performance is not a structural issue.

The Board feels that ZEEL management has execution capability, and this has consistently enabled ZEEL to deliver market beating performance till 2019. It's also important to note that this management got Sony deal to the table which was very great deal for shareholders and the management spent two and a half-years on this deal. We are fully cognizant that there is room for performance enhancement, and we are putting through a revival plan by ZEEL and this is already being put into action to accelerate growth and enhance profitability. We believe that we are capable of executing this plan and we also believe that we will be on a much stronger footing financially in few quarters. We are all committed to performance of the revival plan.

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Board of Directors of the Company has also decided to closely monitor the business model and plan presented by the MD&CEO of the Company wherein he has provided the roadmap to improve the performance and efficiency of each of the businesses to achieve higher EBITDA. We request patience and support from shareholders for the coming quarters. We are confident that beginning second half FY25, there will be visible improvement in the performance.

ZEEL is not constrained in pursuing growth opportunities. ZEEL is fundamentally strong, profitable and debt free Company and continues to make investments in the businesses from internal accruals, like it has demonstrated over the years. We have also built a strong digital presence in the form of ZEE5 entirely from internal accruals. ZEEL is in no way hampered in its ability to invest behind and grow existing business portfolio or compete effectively in general entertainment business.

We have always kept shareholders interest at the heart of its functions and is committed to shareholder value enhancement. The Board has taken several incremental steps to bring in additional measures to protect all stakeholders and enhance the intrinsic value of the Company through this phase. Taking cognizance of widespread circulation of misinformation, market rumors and speculation that has led to formation of negative public opinion about the Company and consequent erosion of investor wealth, the Board of Directors of the Company has formed an independent investigation committee (IIC) headed by Dr. Satish Chandra, retired judge of the Honorable High Court of Allahabad, who shall be the chairperson of the committee and two members of the Board Mr. Uttam Agarwal and P.V. Ramana Murthy, independent directors of the Company. IIC will conduct a thorough review of allegations made by regulatory agencies against the Company, its promoters and KMPs to protect the interests of shareholders and other stakeholders of the Company. The Independent Investigation Committee will submit a report to the Board after completing the exercise, outlining its recommendations and suggesting necessary actions. Additionally, the Company will vigorously continue to defend itself in appropriate legal forums against any malafide and factually incorrect assertions as recently done successfully.

The Board has also roped in leading legal advisor, other third-party advisors and subject matter experts to get specific inputs on several key issues including legal proceedings. The Board is also committed to timely and clear communication disclosures to investors and shareholders.

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With respect to the ongoing SEBI investigation, we have extended complete cooperation in this aspect. In this regard the Company is not aware of any order wherein SEBI has recorded any findings as yet.

On merger failure with Sony, I will reiterate that ZEEL Board and management was fully committed for the completion of the merger by undertaking several permanent and irreversible steps. The Board has also discussions with Sony during the process. At no point in time Sony had discussed with the Board about conditions precedents, materially adverse events. Under the aegis of the Board, ZEEL management was engaged with Sony in good faith discussion to conclude the merger. The MD was also agreeable to step down in the interest of the merger. However, by its communication dated 22nd January '24, Sony unilaterally terminated the merger cooperation agreement and initiated legal proceedings. This move by Sony was premature as ZEEL was still engaged in good faith negotiations and was taking the required steps in the course of its integration journey over the last two-years to ensure that the scheme is implemented at the earliest. We do believe that the assertion that closing conditions not being satisfied by ZEEL is not an accurate or holistic reflection of reality. We reserve our right to make claims including counterclaims against Culver Max and BEPL for breaches of the merger cooperation agreement at the appropriate stage.

The Board is extremely focused on ensuring the highest standards of corporate governance, compliances and process controls. We are confident that Zee is well placed on the governance front for preserving and growing long term stakeholder value. Three proposed independent Board directors bring extensive experience and expertise to the Board, and they are highly independent. NRC has run a robust search process and collectively these three proposed independent directors bring required expertise and critical skill set to the Board. All three have an exceptional track record and solid reputation. I request all shareholders to support the resolution for their appointment which is currently being voted.

With that I'll conclude my opening remarks. I again want to thank you all for your time and we will now be happy to take your questions and suggestions.

Mahesh Pratap Singh: Thank you, sir. Sagar we can open the call for questions and answers.

Moderator:	Thank you very much. We will now begin with the Question-and-Answer Session. The
	first question is from the line of Vivekanand Subbaraman from Ambit Private Limited.

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Vivekanand Subbaraman: My first question to you especially Mr. Gopalan, since you have been on the Board since 2019. In your view how critical is Mr. Punit to the Company's strategy and continuation of its frugal and capital efficient execution?

R. Gopalan:	Well, this is a question the Board has been debating. We are yet to form a view. But I
	would say that we need to consider various factors which are there in the domain of
	our thinking. Basically, I would say that we are putting through a revival process and
	it requires tremendous amount of focus, knowledge of the Company, what it did in
	the past, where all it did not make what it wanted to make. And so, the steps which
	you are now taking are going to be producing the results. That is one. Then also, this
	is a time when our businesses are all looking up. I would say about close to about 80%
	of our shows have gained market shares, which is very significant from our immediate
	and long-term viewpoint. And we are also putting through a succession plan in
	addition. So, these are all getting done. We need to, Board has to really discuss and
	debate whether there is a change necessary at this point in time. And incidentally I
	joined the Board end of 2019, not from early 2019, in November 2019 I joined the
	Board. And secondly, I also want to say that the Company has delivered I would say
	market beating performance till we got into the COVID stage, until the time we have
	been doing extremely well. So, all these factors the Board has to take into account
	before it comes to any conclusion on continuance of Mr. Punit as the MD.

Vivekanand Subbaraman: Just one follow up. Mr. Gopalan, you are the only Board member who has spent a good deal of time with ZEEL and the other independent directors are all new. So, how are you ensuring that the other Board members are familiarizing themselves quickly about the intricacies of this business, the history that ZEEL has had. And that is important because of the ongoing investigation by the SEBI and also in gauging the efficacy of the leadership?

R. Gopalan:I have tasked our management including various division heads to spend time with the directors and brief them adequately so that they are in a position to fully understand the complexity of the business. This is what we call orientation. But the orientation is not a shallow one. It's a very deep one. Two, all the new directors we have chosen are exceptional, person of high caliber knowledge. They bring in their domain expertise into the whole functioning. So, this is the second thing I should tell you. Three, the Board itself is now undertaking, starting from this Thursday an exercise, a monthly exercise with the management team with each vertical to clearly

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tell them what they should do, what is the performance expected of them for this year, what is the profit their division which they have to deliver and how they will overcome the difficulties in the foreseeable future as the market also gets competitive. So, this will all be going into how we rate everybody's performance. And that will have future implications as well. So, we are making this process very rigorous, and we are hopeful that we will be shaking up the organization so to say. And also, through this process, the new directors will be in a position to fully understand and appreciate how the business is run.

Moderator:The next question is from the line of Vinay Jain from Karma Capital.

Vinay Jain:If you see in the last few months, there has been irreparable loss in the interest of the minority shareholders. So, as a Board member what are we doing to safeguard the interest of the minority shareholders? And secondly, you mentioned in your opening remarks that you guys have set up an independent committee which would be reviewing all the allegations made by the regulatory agency. So, by when can we expect an outcome from the independent committee? Those were my two questions.

R. Gopalan:In respect of what value, we are going to create, how we are protecting the interest of minority shareholders. One thing is that we have in the past, the Board at least including the independent directors in the past have taken a series of steps to improve the governance in the Company, either in dealing with the movie advances or collecting receivables or creating policies and that the policies get implemented, get into the related party transactions, reducing the number and value. We have done a lot of work in the past to ensure that the shareholder interest is enhanced. We will continue to do the same more rigorously and to ensure that all issues relating to technology, cyber, theft and those other issues which will impact our business, we will be in a position to address them so that the revenue leakage does not take place.

On whatever is being talked about on market rumors and speculation; what we have done is, we have constituted an independent investigation committee under Justice Satish Chandra; former judge of the Allahabad High Court as a chairperson and Uttam Agarwal; Chairman of the audit committee and Mr. Ramana Murthy who is an Independent Director and HR expert. They are in this group to conduct all the investigation on allegations made by the regulatory agencies against the Company, against the promoters, against the KMPs etc. so that we protect the interest of the shareholders and other stakeholders. They will submit the report. We have indicated

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	to the Chairman of the committee that we need to have the findings as early as
	possible and we will monitor. We'll also keep updating you as we go along on the
	progress of the committee's work.
Vinay Jain:	So, our only again request is that, it shouldn't be the case that 96% of the minority
	shareholders get punished for the wrongdoings of promoters holding around 4%
	stake in the Company. That's the only request.
R. Gopalan:	I can assure you this whatever investigation is going on, there is going to be no loss
	for the Company. That is something I can assure you because whatever advances have
	been given, I can tell you that these advances have either come in the form of
	inventory or in the form of advances back. But to that extent I don't expect any loss.
	And whatever the regulatory authors do in addition to that is something we'll get to
	know as soon as their findings are out.
Vinay Jain:	We'll try and be updated or stay updated and to hear back from you on the
	independent review committee's investigation committee's outcome.
Moderator:	The next question is from the line of Sameer Deshpande from Fairdeal Investments.
Sameer Deshpande:	I would like to know, with respect to the deal of Sony which we have been very eager,
	and all the shareholders were eager to do that because Company needed
	technological competence as well as the money muscle to tide over the OTT losses
	which the Company has been incurring for so long. And post Reliance-Disney deal,
	the industry dynamics have also changed, and our market share is about 16% and the
	competition will be holding 33%-34% which will be twice. So, that will hit our
	bargaining power in advertisement and content everywhere and the sports business
	also they have completely captured that. So, actually, Sony recently filed a case
	against our Company with respect to, they are saying that the arbitration window is
	already open, so everything should be discussed in arbitration with Sony in Singapore
	Arbitration Tribunal and not in the NCLT. We have filed a case in NCLT, and I think I
	don't know. I would like to know from you whether we are very confident of the
	outcome of NCLT for going ahead with the merger or whether we will have to go to
	the arbitration and if arbitration is the case, it is always a good place to have some
	reconciliation over the differences which are there on the condition precedent. So,
	there may be certain things which may beyond our control, that is Zee's control which
	that is supposing Russia, we closed the operations, but we could not close the
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Company may be due to their regulatory issues in Russia. So, if these are the things which are the subject matter of the non-compliance of the condition precedent, those things can be settled or reconciled in arbitration tribunal or NCLT I don't know. So, you can please tell us about this and what happened today in the institutional investors meet which was there today, what was the stance of the institutions? I think we need full transparency on those things because we are a part of the 96% of the shareholders and we have suffered a lot from 2019 onwards due to various court cases against the management and all those things.

Mahesh Pratap Singh: Just to sum up Sameer you had three questions. First was competitive intensity with what's happening. Second was NCLT and arbitration. And third was institutional investor meet. So, we'll take one by one, but I just wanted to sum it up so that we can address it.

R. Gopalan:What I want to say is that as far as the competition is concerned let me say, we have only entertainment and we are not in sports. And basically, in entertainment what we find is that the bulk of our advertisement revenue comes from FMCG companies. We need to be even more creative in cornering the increased pie of the advertisement revenue which is going to flow as a result of the improvement in the economy, rural incomes going up and consequent improvement in advertisement budget of various FMCG companies. So, that is something which we are capable of making it and we will have to enhance our efforts to see that we get a greater pie for that. That I think based on our performance and our capabilities, I'm sure we will be in a position to get back. This is one.

And second as far as NCLT issue is concerned, it's sub-judice. And you talked about arbitration, yes, we would like to use both the forums to see that we are able to get a good deal for the shareholders. Our intention is to see by using these forums can the merger take place. We want the NCLT to direct implementation of the merger scheme under the statutory provisions which govern the merger. So, that is our aim which we are going ahead. To us the advice is that it's the right forum given our position that the termination by Sony was premature. So, we will continue to pursue all the options available to us based on the evolving situation and further legal advice.

On institutional discussion, what we really are looking at is, how we can improve our performance and ensure that the Company gets back to its old days of high EBITDA and revenue increase. We want to create that back again and we assured them that

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we will monitor the entire performance just as we as I mentioned earlier that we'll be doing a monthly review of performance of each vertical at the Board level which we'll be doing starting from this Thursday. And we will take as necessary actions to improve the profitability and performance. And we will keep communicating with everyone every stakeholder on this.

Sameer Deshpande: Actually, there is another question which I would like to ask Mr. Uttam Prakash Agarwal. Can I go ahead?

Uttam Prakash Agarwal : Yes.

Sameer Deshpande: Welcome Mr. Agarwal to the Board of Zee. I am also a Chartered Accountant and you have been the President of Institute of Chartered Accountants for a few years. I have great respect and I'm happy that you are here now. And actually, I would like to know Zee had always auditor in place who have been Deloitte which is the largest auditing firm in the world. They have been the auditors of Zee for last 5 years during all this period of '19 to '24 where all these issues surfaced with respect to contingent liabilities, various court matters and liabilities with respect to the related parties etc. So, we have seen that books of accounts have been cleaned for almost 2 to 3 years where there have been extraordinary charges which have been taken by the Company with respect to these various matters and non-recoverable of the dues from the related companies. So, now the matter again has surfaced with regulatory bodies and they have been putting certain charges that the guarantees given to the group companies etc. exceed about Rs 2000 crores or Rs 4000 crores. I don't understand the figures but there were Rs 200 crores of thing which was against Mr. Goenka, and he was removed. And later again he was reinstated in the position because the charges have not been proved. Now the matters are old as about 4 years back and 5 years back. So, can you throw some light on this because the books are audited by reputable firms. What is the gravity of the situation now? Because can the shareholders again face some liability because the Company has to pay Rs 2000 crores odd because of some liabilities materialized? So, can you please address this thing?

Uttam Prakash Agarwal: Thank you very much first of all that you have a confidence on me. And, I think what issue you raise about that, there is information through the newspaper and all. And even though there is a multinational firm they have audited. But as a chairman audit committee I requested Board to take this information into consideration and examine all the 3-4 years record and that to the under leadership of Justice Satish Chandra ji

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