Subhash Chandra’s statements on ZEEL stake hike under Sebi scrutiny: Sources

Sebi is now examining whether his statements violate disclosure requirement norms and insider trading code, like price manipulation, people cited above said.

Market regulator Securities and Exchange Board of India (Sebi) is examining recent statements by Zee group founder Subhash Chandra about the Zee promoter family’s purported plans to hike its stake in Zee Entertainment Enterprises Ltd (ZEEL).

Sebi is examining whether his statements constitute a potential breach of disclosure norms, sources aware of the development told Moneycontrol on January 30, requesting anonymity.

An email query sent to Sebi remained unanswered till the time of publishing this report. A Zee group spokesperson declined to comment.

In several media interviews recently, Chandra said that the promoters would, over a period, increase their stake in the company from the existing 4 percent to 26 percent.

What did Chandra say?

Related stories

Deborshi Chaki

Senior Editor – Corporate

Without giving a timeframe, Chandra said that the promoters will not raise any external funding for the stake hike.

Sebi is now examining whether his statements violate disclosure requirement norms and insider trading code, such as price manipulation, people cited above said.

These statements came in the wake of the breakdown of negotiations between Zee Entertainment and Sony Pictures.

What do the rules say?

Sebi rules mandate that listed companies disclose any material events to shareholders first through stock exchange platforms. Also, in developments such as promoters hiking stakes, rules mandate the company to make the proposal to the board of the company and then to the investors.

To be sure, Chandra does not have any directorship or any executive role in ZEEL and is currently designated as Chairman Emeritus. His son, Punit Goenka, is currently the MD and CEO of the company.

“If promoters are indeed increasing their stakes, it needs to be verified if the decision was made after all due procedures. It also needs to be ascertained if any of the insiders were privy to the news and whether there is a funding plan in place,” said a person cited above. Notably, Chandra said that the promoter family does not intend to raise any external funding for the planned stake hike.

Legal experts say while it is not uncommon for promoters to state their intent to increase or decrease shareholding in a company, unsubstantiated statements could potentially mislead shareholders.

The Zee promoter group is already facing several regulatory proceedings from Sebi for alleged violation of market rules. In an interim order dated August 14, Sebi barred Chandra and his son Punit Goenka from holding directorship in any listed companies. This order was later overturned by the Securities Appellate Tribunal (SAT), which reinstated them.

These orders were passed in a case pertaining to the alleged siphoning of funds by the promoter family from listed entities of Zee. Sebi also observed that Chandra had given a letter of comfort to Yes Bank for a Rs 200 crore loan to an unlisted company, Essel Green Mobility.