Battle between DTH company Dish TV and YES Bank likely to escalate

Company plans to challenge bank over bid to sack board members

The battle between DTH company Dish TV and YES Bank, its largest shareholder, is likely to escalate with the firm looking at challenging the bank over a proposal to sack the board.
 
Sources said there is no basis for sacking the existing board members as demanded by the bank. This is because it was under the aegis of the same board that YES Bank sanctioned loans to the company, even as late as February 2020, based on performance, they added.
 
“The company, despite Covid-19, has performed well, reducing its debt from Rs 1,800 crore to Rs 600 crore now. It has paid all the loans of YES Bank. So, how does the same board of 6-7 years become incompetent? YES Bank has to decide whether it wants to be a lender wanting to recover its money given to promoter entities or a shareholder in Dish TV. It cannot be both,” said a source aware of the development.
 
The move comes after YES Bank, which has a shareholding of 25.63 per cent in Dish TV, issued a special notice to the company asking for removal of all the existing five directors. This includes Jawahar Goel, managing director (MD) and part of the promoter group of the company (holding below 6 per cent now).  
 
It alleges that the present board had cleared a rights issue, primarily with the objective of diluting the bank’s stake, acting on the behest of minority shareholders. This came despite repeated objections to the board by the bank. It has also given notice for appointment of seven new directors on the board.
 

Sources close to Dish TV, however, point out that the rights issue is crucial for the company’s expansion as most of the surplus cash has been going towards paying off debt. The rights issue was cleared by a committee with independent directors on the board. Responding to the allegations of YES Bank, that it has been pushed through with the aim of merely diluting its stake, sources in the know said YES Bank as a shareholder has every right to subscribe to the issue and maintain its equity level.
 
The company also reiterated that under clause 5.10 of the uplinking guidelines of the Information & Broadcasting ministry, it is obligatory on part of the company to take prior permission from the ministry before effecting any change in the board or chief executive officer (CEO).
 
Under the rules, security clearance is a prerequisite for appointment as directors and that has not been taken.
 
Dish TV pointed out that under the Securities and Exchange Board of India (Sebi) listing rules, the board of directors of top 2,000 listed entities has to have not less than six directors.
 
Therefore, the board of Dish TV mandatorily has to have six members, which it currently has. It has made it clear that removal of even one director from the board without the ministry’s clearance of new directors cannot be undertaken statutorily.    
 
However, there have also been discussions on a possible settlement. According to sources, Subhash Chandra and family, who are the promoters, have been in talks with the bank on paying back loans. They have had discussions on a plan and time period to do so.
 
YES Bank, which had lent over Rs 4,200 crore to promoter entities, had to invoke some of the pledged shares of the promoters in Dish TV after they defaulted on their loans. This led to the conversion of YES Bank’s debt into equity. As a result, the bank was able to get over 25 per cent stake in Dish TV.
 
According to analysts, the loans were given when the share price of Dish TV was over Rs 70. However, when the pledged shares were invoked last May, it was at Rs 4. The shares of Dish TV on Tuesday, however, closed 12.77 per cent higher at Rs 15.54 on the BSE.