While the Essel Group-owned broadsheet is sacking people to optimise cost, investments are being made into the Group’s flagship infrastructure company, Essel Infraprojects.

By Gaurav Sarkar

Six months into 2019, and the layoffs across DNA’s bureaus show no signs of slowing down. On May 11, 26 pink slips were handed out to employees—including those from the editorial team—at the newspaper's Mumbai bureau. More recently, on June 8, Deepak Lokhande, DNA’s managing editor for Mumbai and Ahmedabad, was laid off—clearly indicating that the newspaper’s efforts at cost-cutting are still underway.  

But a closer look at the shareholding structure of the paper and its parent group shows that DNA's destiny is in many ways tied to its parent group's infrastructure business.

Diligent Media Corporation is the parent company that runs DNA. Its two largest shareholders are 25FPS Media Private Limited and Arm Infra & Utilities Private Limited, holding 35.31 per cent and 33.79 per cent of Diligent Media shares respectively. A company called Primat Infrapower and Multiventures Private Limited holds 100 per cent of the shares in both 25FPS and Arm Infra & Utilities. Primat is in turn owned by Spirit Infrapower & Multiventures Private Limited, which went by the name Spirit Textiles till 2017. The largest shareholder in Spirit Infrapower & Multiventures, with 51 per cent stake, is Sushila Goenka, whose husband Subhash Chandra is the chairman of the Essel Group.

This is where the thin line between Chandra’s infrastructure business and his news business vanishes.

The Essel Group's flagship infrastructure company is Essel Infraprojects, a company saddled with over ₹13,000 crore in debt. Essel Infraprojects is linked to DNA through Spirit Infrapower & Multiventures. The largest shareholder and the holding company of the Essel Infraprojects is PAN India Network Infravest Limited, which holds 61.58 per cent of its shares, while Spirit Infrapower & Multi Ventures holds 12.32 per cent shares.

Spirit Infrapower & Multi Ventures—the ultimate holding company of DNA and in which Chandra’s wife is the largest shareholder—reported zero revenue from operations in 2017-18. Its total income during the year was ₹64.63 crore, classified as “other income” in its books. This “other income” of the company was primarily derived from dividend received from shares and other book adjustments. Technically, it showed losses of ₹259 crore. In 2016-17, its revenues were only ₹67.95 crore. In 2015-16, its revenue from operations was ₹93 lakh.

Yet it had made investments of ₹1,557 crore in its various subsidiaries and associate companies as of 2017-18. Of these current investments, ₹1,062.7 crore was made in PAN India Network Infravest—the holding company of Essel Infraprojects. On the other hand, no substantial investments were made in its subsidiary company—Diligent Media Corporation—which operates DNA newspaper.

As of March 31, 2018, Essel Infraprojects had a debt of ₹13,741 crore. Its long-term borrowings had increased by almost ₹4,500 crore as compared to the previous financial year of 2017. This company has hundreds of subsidiaries and is heavily invested in green energy, toll roads and urban infrastructure projects across India. Almost ₹9,300 crore of Essel Infraprojects’ outstanding debt is from banks and financial institutions, while ₹3,148 crore was raised by issuing non-convertible debentures. Spirit Infrapower & Multiventures, a company with zero revenue from operations, had unsecured long-term borrowings of ₹3,042.30 crore as of 2017-18. This included non-current debt of ₹2,617.30 crore and current debt of ₹425 crore. This money was borrowed by this company from banks and non-banking financial companies by pledging shares of listed companies owned by Subhash Chandra. Chandra’s listed companies include Greatway Estate Private Limited, Zee Learn and Zee Entertainment Enterprises Limited (ZEEL).

It should be noted that Spirit Infrapower & Multiventures picked up loans from mutual funds in which ordinary people invest. For a company which has no definitive source of income, various mutual funds had invested money as of 2017-18. These include mutual funds operated by HDFC, Axis Bank, State Bank of India, ECL, Edelweiss, ICICI Bank and the Aditya Birla group.

This effectively means that if the share prices of the pledged entities like ZEEL and Zee Learn were to crash, these mutual funds could face losses of various amounts based on their exposure. A case in point is Aditya Birla Sun Life Trustee which paid ₹650 crore to Spirit Infrapower & Multiventures on November 24, 2017, for allotment of 10,000 debentures. Similarly, on August 3, 2017, Credit Suisse paid ₹250 crore for 2,500 non-convertible debentures.

***

On January 24, 2019, The Wire reported that Zee’s controlling shareholder Essel Group’s name had emerged in a probe linked to large deposits made after demonetisation. The report said the Serious Fraud Investigation Office was probing a company called Nityank Infrapower (formerly Dreamline Manpower) for making deposits of over ₹3,000 crore between November and December 2016. Demonetisation was announced on November 8, 2016.

Following the publication of The Wire’s report, Chandra’s Essel Group reportedly lost market capitalisation worth approximately ₹11,000 crore across stocks—namely, Zee Entertainment Enterprises, Essel Propack, Zee Learn, Dish TV India, and Zee Media Corporation. BloombergQuint reported that shares of the Zee Group of companies tumbled at least 19 per cent, and "shares of broadcaster Zee Entertainment Enterprises Ltd fell nearly 25 per cent—the most since October 2008—to ₹326.60 a piece on National Stock Exchange”. The report also pointed out that the stock was on track for its worst-ever single-day fall since March 1999.

Between January 25 to February 1, the immediate period following The Wire’s report, several lenders, including Credit Suisse, sold part of the Essel Group promoters’ shares in Zee Entertainment Enterprises worth over ₹1,000 crore that was pledged with them.

On February 3, the Essel Group bought an eight-month extension from its consortium of lenders to clean its books. The group stated that it had signed a formal agreement with its lenders—those who had taken pledged shares of the group’s flagship and listed entities, Zee Entertainment Enterprises and Dish TV India—to keep it afloat. This understanding gave Essel Group time until September 30, 2019, to deleverage or pare its debt. According to Firstpost, the agreement was to not declare the company a defaulter as it had admitted that it could service the debt only up to December.

On February 6, DNA’s Delhi edition was shut down—a move that affected at least 15 people from across marketing and circulation teams. At the time, an internal message had stated that this move wouldn’t affect the newspaper’s editorial team: “The management has decided to close Delhi DNA edition with immediate effect. There is no need to panic. Nobody in editorial is losing job. We are now converted into bureau. Management wants to concentrate on main Mumbai edition and get back its lost glory. We will absorb city colleagues into Bureau as much as we can. Take care and continue to work. We are still within 5 leading English language dailies in country. No need to panic.”

Seventeen days after the closure of DNA’s Delhi edition, which began its circulation in the capital in October 2016, DNA’s Jaipur edition was shut down with effect from February 21. The decision was taken to “optimise cost and cut-down losses,” said Diligent Media Corporation Limited, the Bombay Stock exchange-listed entity that operates the newspaper, in an announcement. The paper was founded in Mumbai in 2005.

Read More >>

Article first appeared in the newslaundry.com on 12th June 2019