Zee Entertainment Enterprises (ZEEL) fell 2.02% to Rs 313.05 after three directors of the company resigned, with two citing related-party loans and film advances, among other issues, as the reasons.Among the reasons listed are film advances of Rs 2200 crore given in 2018-19, laxity in spending funds for corporate social responsibility (CSR) and large outstanding dues from Essel group companies Dish TV and Siticable.
In an exchange filing, ZEEL informed investors that Subodh Kumar and Neharika Vora have both given certain reasons, which have been considered by the board of directors for their resignation. The company, while accepting the resignations and intimating the exchanges about the same, has discussed the same in detail in the board meeting held on 25 November 2019. The board of directors have noted that all of the issues raised by the resigning directors have been duly discussed, deliberated and acted upon from time to time in the previous committee/ board meetings in which the said directors were also present. All these have been duly disclosed in the public domain in financial statements and investor calls which are available on the company website, the exchange notice said.
In the filing, ZEEL said that details of the film advances of Rs 2200 crore have already been disclosed in the annual report and clarified in various investor interactions. To the directors' concerns on a scheduled bank having appropriated Rs 200 crore of the ZEEL's fixed deposits towards promoter loans, the company said issues pertaining to the wrongful revocation of the bank guarantee stand resolved with the company having being secured by the promoter companies and appropriate legal notices were sent to the bank at the relevant time.
The company added that CSR funds have been allocated in compliance with the law (and this has been certified by chairman of the CSR committee) and necessary certification obtained.
The directors also raised concerns on a scheduled bank having written to all directors in October 2019 that a subsidiary of the company had guaranteed the repayment of certain loan given by the bank to a related party. ZEEL countered, saying that the company has a legal opinion to state that the company is not liable and in any event there has been no enforcement of the 'guarantee' by the bank, other than to write letters, including to all the directors.
Regarding a letter received from a PMS (portfolio management services) entity holding preference shares of the company raising questions regarding build-up of related party balances and advances for content acquisition, the company said that the audit of the issues pertaining to related party transactions and advances is underway by auditors.
Regarding the outstanding from Dish TV and Siticable, ZEEL said the same have been secured by definitive plan and situation is being strictly monitored as instructed by the board and also discussed in various analyst calls.
Earlier this week, ZEEL chairman Subhash Chandra stepped down from his position, days after the promoter Essel Group sold close to 16% of its stake in the open market that resulted in a reduction in the overall holdings of the group in ZEEL to 5%.
The board of ZEEL was also reconstituted with the appointment of three new independent directors in lieu of two independent directors and one nominee director of the Essel Group.
The scrip has been reeling under some selling pressure over the past few sessions. The scrip has fallen 12.53% in four trading sessions to its current market price from a recent closing high of Rs 357.90 on 22 November 2019.
The company's consolidated net profit rose 6.9% to Rs 413.23 crore on 7.4% rise in net sales to Rs 2,122.01 crore in Q2 September 2019 over Q2 September 2018.
Zee Entertainment Enterprises is one of India's leading media and entertainment companies.
On the technical front, the stock's RSI (relative strength index) stood at 54.52. The RSI oscillates between zero and 100. Traditionally the RSI is considered overbought when above 70 and oversold when below 30.
The stock was trading above its 50-day placed at Rs 279.91 but was below it 200-day moving average (DMA) placed at Rs 357.04.
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