Zee’s Punit Goenka charts new course after Sony-merger collapse

In January 2024, Zee Entertainment Enterprises (ZEEL) faced a major setback with the collapse its proposed $10 billion merger with Sony Group Corp. This decision, following two years of twists and turns, left Zee needing to chart a new course. While the company has maintained a forward-looking approach, there have been significant internal changes, including restructuring, cost-cutting measures, and people movements.

Here’s a look at Zee’s post-merger actions, unpacking the key measures the company and MD and CEO Punit Goenka have taken since January 22, 2024.

Response to merger termination and legal action
On January 24, 2024,Zee responded to Culver Max Entertainment Pvt’s merger termination notice denying any breach and asserting compliance with MCA obligations.Zee also approached the National Company Law Tribunal (NCLT) seeking directions to implement the merger scheme and initiated legal action in arbitration proceedings at Singapore International Arbitration Centre.

Next, the Singapore International Arbitration Centre (SIAC) denied emergency interim relief sought by Culver Max and Bangla Entertainment (BEPL), shifting the focus back to NCLT.

Financial results and strategic planning
Then came the financial results, for the December quarter of FY24.The quarter clocked 140 percent surge in profits at Rs 58.5 crore, against Rs 24.32 crore in the corresponding period of the previous year.

Additionally, the company recorded a 15 percent rise in income, amounting to Rs 223 crore, compared to Rs 194 crore reported in Q3 FY23.

However, while navigating the fallout from the terminated merger deal that company experienced a sequential drop in profits, marking a 52 percent decline from the previous quarter. In Q2 FY24, the company reported a profit of Rs 122.96 crore. In the earnings update, the company mentioned impact on cost structure due to the merger.

Punit Goenka’s strategic vision
“We had accelerated our technology and digital investments in anticipation of impending merger to be able to hit the ground running on merger synergies,” the report said.

Domestic ad revenues came at Rs 9,867 million with a quarter on quarter increase of 4.9 percent and a year on year decline of 2.7 percent.

In the earnings call CEO and MD, Punit Goenka said, “I am a firm believer in learning from the past, living in the present and believing in the future.”

Goenka touched upon the overall macro-economic environment and mentioned how it remained soft due to weak consumption patterns in some markets and impacted advertisement revenues.

“Although we continue to post moderate growth, the momentum remains slow as the overall sentiment is yet to fully recover. As a result, we are implementing certain strategic steps, in order to enhance our performance in the coming quarters,” he said.

Goenka mentioned chalking out a firm and structured plan to bring back margins.

In the coming quarters, Goenka said their plan would be centred around three key aspects.

These included frugality, optimisation and sharp focus on quality content.

“Going forward, there will be a sharper emphasis on frugality, with a crystal-clear focus on quality and output.Across verticals – including technology, content, and marketing we are implementing steps to optimise spends and enhance the return on investments. A sound recalibration of the OTT cost structure will be an integral part of this process. In terms of optimisation, our aim is to enhance our productivity by implementing a structured resource optimisation drive,” Goenka said.

And thus began the big changes. One after the other.

Operational changes and independent committees
On February 23, the board of directors at ZEEL approved the formation of an independent advisory committee.

The committee, led by Dr Satish Chandra, a former Judge of the High Court of Allahabad, comprised of two independent directors of the company, Uttam Prakash Agarwal and P V R Murthy.

This independent body was tasked with reviewing and addressing the widespread circulation of misinformation, market rumours, and speculation that negatively impacted the company’s public image and investor confidence.

Just four days later, the company expanded the scope of its independent committee, renaming it the ‘Independent Investigation Committee’ to thoroughly review allegations against the company.

Leadership reshuffle and strategic realignment
On March 10, came the first big resignation.

Rahul Johri, President Business- South Asia, decided to step down from his office, expressing desires to pursue interests outside the organisation.

Soon after on March 15, Nitin Mittal, President – Technology and Data stepped down citing the same reason as Johri.

On the same day, ZEEL announced strategic changes in the Technology and Data vertical. Several reporting lines were altered, and significant steps were implemented to build a new lateral structure that laid a sharper emphasis on accountability and results. The steps taken by the MD and CEO were aimed towards achieving a cost-effective structure, optimising resources, and maintaining a sharp focus on quality, enabling continued success for the long-term growth of the company.

Close to a fortnight later, the Board of ZEEL institutionalised a structured Monthly Management Mentorship (3M) Program.

The objective of this 3M Program is to guide and enable the management team to achieve key performance metrics, including the targeted 20 percent EBITDA margin, proposed by Goenka.

In just a few days came another announcement.

Streamlining operations and cost reduction measures
Basis the guidance received from the board during the 3M Program, ZEEL implemented strategic steps to streamline and overhaul its technology and innovation centre. The technology and innovation centre structure was cut by approximately 50 percent, with its scope of work streamlined.

On April 2, Punit Goenka, announced his decision to implement a 20 percent reduction in his remuneration.

Punit Misra, President of Content and International Markets, stepped down. Misra was the head of content for both the TV network of ZEE as well as its digital offering ZEE5, both domestically and globally. He also managed ZEEL’s international business spanning 190 countries.

On April 5, Goenka, proposed the implementation of a lean and streamlined management structure to the Board, in line with his strategic plan focused towards achieving the targeted goals for the company.

Goenka initiated the process of rationalisation of the workforce by 15 percent, that is aimed at pruning the staff strength across the company to arrive at a streamlined team that is sharply focused on the set goals for the future.

Forward momentum or aftershocks of failed merger?
While more resignations are anticipated, jury is out on whether these steps taken by Zee represent a true move forward or are simply aftershocks of the failed merger. StoryBoard18