Shares of Dish TV zoomed 13 per cent on Tuesday, following reports that one of its lenders, YES Bank, had sent a notice to the company to remove the top management, along with its independent directors after the company board decided to raise Rs 1,000 crore via a rights issue.
On Tuesday, Dish TV shares closed at Rs 15.54 a share, giving it a total market valuation of Rs 2,861 crore.
Although Indian lenders, who currently own a majority stake in the loss-making Dish TV, are planning to overhaul the direct-to-home service provider’s management, analysts say lenders have a slim chance of recovering their loans, given the dire financial metrics of the company. The company made a loss of Rs 1,178 crore in 2020-21 on revenues of Rs 3,249 crore.
The debt of the company, however, came down as several banks decided to swap their debt for equity due to default.
On Monday, Dish TV informed the stock exchanges that YES Bank had decided to remove the management, along with independent directors, citing corporate governance concerns.
Dish TV is led by Jawahar Lal Goel, brother of Essel Group founder, Subhash Chandra. Essel Group is also undergoing a separate debt restructuring, where 91 per cent of lenders decided to settle the debt after taking a haircut.
Indian lenders, saddled with debt, are taking several companies to the National Company Law Tribunal for debt resolution. After a recent Supreme Court judgment, banks are also invoking personal guarantees of promoters. In the bankruptcy process, the average haircut of lenders is as high as 60 per cent.
Dish TV did not comment on the issue on Tuesday.
In a communiqué, YES Bank has sought the removal of these directors, citing the present Dish TV board’s decision to approve a rights issue process of Rs 1,000 crore, despite objections raised with it time again, “solely to dilute the shareholding of the bank”, which is its single largest shareholder.
The bank said the Dish TV board is not acting in line with good corporate governance standards is not a fair representation of the incumbent significant shareholders of the company, being various banks financial institutions holding about 45 per cent shareholding in it.
It said the “board is purportedly acting at the behest of certain minority shareholders holding merely 6 per cent of shares in the company”.
It said this is reflected in the fact that even though the bank asked the board to desist from approving or conducting the proposed capital-raising exercise by way of a rights issue, without consulting the significant shareholders, it went ahead to make a press announcement on May 28, that it would proceed with a Rs 1,000-crore rights issue.
YES Bank notice says the board sidelined its multiple requests to reconstitute the board by appointment of nominee directors, that it acted in haste took arbitrary decisions to proceed with the rights issue process.
“The board has not acted on the legitimate request of the bank,” it said.
In this regard, YES Bank said it had issued a letter dated June 19 to the Dish TV board, emphasising the need for reconstitution of the board not proceed with the rights issue process till a new board is reconstituted.
On June 25, YES Bank sought the induction of Akash Suri Sanjay Nambiar as additional directors on the board of Dish TV.
“The management has completely disregarded other viable possible options for fund-raising that would be in the best interests of the company its stakeholders,” said YES Bank.
“This was done solely to cause prejudice to defeat the rights entitlements of the significant shareholders by diluting their stake in the company, even after being aware that the matter is under consideration before the Securities Exchange Board of India the stock exchanges pursuant to our letter dated June 19,” the bank added.