Disgruntled shareholders oust a record 25 directors from Dish TV board in 3 years

Shareholder outrage has opened a revolving door for Dish TV India Ltd’s board, with investors ditching every new nominee put forward by the company and new independent directors appointed by the company facing the same fate.

Investors have ousted a record 25 directors from Dish TV’s board in a little more than three years, including two on Thursday, as the company continues to resist shareholder requests for a special meeting.

Every three months, Dish TV appoints new directors to maintain the mandatory minimum board size of three, but shareholders reject their nominations. While no rules were clearly broken, the impasse has the potential to harm company operations and shareholder value.

In August, shareholders also rejected a resolution seeking approval to raise capital $In addition to multiple rejections of resolutions to pass the company’s financial statements for 2022, it has also taken on a debt of Rs 1,000 crore.

Not satisfied with the promoter

Public shareholders, who collectively own nearly 96% of the company, are unhappy with Dish TV’s promoters and are seeking an extraordinary general meeting to restructure the board. However, the promoters, which hold 4.04 per cent stake, have not given in to the demand for more than three years.

In the latest example, the candidatures of independent directors Amit Singhal and Parag Agarwal were rejected by shareholders, voting results disclosed on Thursday showed. Just over 80% of the votes cast were against the resolution approving his appointment.

Subsequently, the company appointed Mayank Talwar and Gurinder Singh as independent directors with immediate effect. CEO and Executive Director Manoj Dobhal is the third director on the board and the only one to receive shareholder approval in the past three years.

Dish TV did not respond to Mint’s email seeking comment.

A similar situation has emerged at Pune-based Finolex Cables, where 14 directors were sacked in just over three years. In Finolex’s case, however, the expulsion was the result of friction between two warring promoter factions.

Equity imbalance

The impasse at Dish TV stems from the relatively small stake held by promoters Essel Group, although they are believed to control the management and operations of the company. To be sure, the promoters, including former managing director Jawahar Lal Goel, currently do not hold any position in the company.

Meanwhile, public shareholders, who own a majority of the company’s shares, complained about not having a say in its operations.

Essel Group’s flagship company Zee Entertainment Enterprises is facing a similar situation, with promoters holding nearly 4% stake.

JC Flowers Asset Reorganization Company is the largest shareholder of Dish TV, holding 24.19% of the shares. The distressed asset buyer acquired the shares from Yes Bank in December 2022. Subhash Chandra, founder of Essel Group and brother of Jawahar Goel, borrowed $He received Rs 5,000 crore from Yes Bank, but he was unable to repay the loan, leading the bank to quote Dish TV shares as collateral.

Other major shareholders include Aditya Birla Sun Life Mutual Fund (1.59%), Deutsche Bank (1.52%) and Barclays (1.09%).

JC Flowers Responsibilities

“As the largest shareholder, JC Flowers should take the lead in resolving the dispute with the promoters. It is unclear whether they are engaging in any dialogue. Otherwise, shareholder value will be eroded and the company will further lose market share in a highly competitive market.” said Shriram Subramanian, managing director of proxy advisory firm InGovern.

Subramanian called on the authorities to intervene.

“MCA has the power to replace the board and appoint a new one. There is a precedent in the case of Satyam Computer Services Ltd when the government appointed a board headed by Deepak Parekh to stabilize the company,” he said. MCA is the Ministry of Corporate Affairs and oversees the implementation of the Companies Act, 2013.

JC Flowers ARC had no comment.

Last year, Chandra agreed to pay JC Flowers $1,500 Crore dues Rs. $Mint quoted sources as saying that it will spend Rs 6,500 crore to buy back Dish TV shares. But so far, no payment has been made.

Dish TV has also been fined multiple times by stock exchanges for violating the Securities and Exchange Board of India’s (Sebi) Listing Obligations and Disclosure Requirements (LODR) and failing to meet various board charter requirements. Most recently on Wednesday, the Bombay Stock Exchange and the National Stock Exchange of India $640,000 each was criticized for not having a female director on the board of Dish TV and not following the guidelines for forming nomination and remuneration committees.