The app that’s making Dish TV buyers see pink

Final week, Dish TV disclosed to the Bombay Inventory Trade a 28-page letter from Sure Financial institution, which said that the corporate has proceeded with a plan to lift 1,000 crore by means of a rights problem, regardless of objections by the financial institution.

“The (b)oard is just not appearing consistent with good company governance requirements,” Sure Financial institution wrote within the letter, dated Friday, 3 September.

The rights problem may solely be the straw that broke the proverbial camel’s again. The investments in Watcho is one other main sticking level, in response to inside Sure Financial institution paperwork reviewed by Mint reporters.

In a letter dated 2 August 2021, Sure Financial institution, which owns 25.63% of Dish TV, sought particulars from the corporate on its funding of greater than 1,200 crore in ‘augmenting new-age applied sciences inter alia OTT platform Watcho’ during the last two years.

Earlier in April, Sure Financial institution had requested Dish TV an identical query on its investments in Watcho.

“We’ve got repeatedly questioned the rationale of those investments (in Watcho) however we now have not heard from them. We’ve got requested the Board (of Dish TV) to induct two of our executives. We maintain a 25% stake, and so it’s solely pure for us to ensure our funding within the firm is monitored,” stated the primary government.

Emails in search of feedback on this story despatched to spokespersons at Dish TV and Sure Financial institution didn’t obtain responses.

Unique content material

Watcho was arrange by Dish TV in April 2019 because the administration reasoned that producing unique content material was a method to assist get extra enterprise from subscribers, a lot of whom had been spending extra waking hours consuming motion pictures and tv collection supplied by US streaming giants reminiscent of Netflix and Amazon, aside from a clutch of house grown apps.

Epic tussle

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Epic tussle

Dish TV first invested 693 crore to construct this content material manufacturing enterprise within the yr ended March 2020, adopted by 685 crore final yr, in response to the annual experiences. That represents a cumulative spend of 1,378 crore on Watcho during the last two years.

The corporate’s income was 3,249.4 crore final yr, down 8.6% from 3,556.3 crore within the yr ended March 2020. In different phrases, Dish TV invested 21.3% and 19.2% of its income in every of these years, respectively, in a enterprise into which nobody outdoors the corporate has any visibility. That is making buyers scowl.

Shareholders reminiscent of Sure Financial institution should not the one stakeholders who’re in the dead of night about Watcho. Walker Chandiok & Co. LLP, the Indian affiliate of audit agency Grant Thornton LLP, and Dish TV’s statutory auditor, too, doesn’t know the best way to qualify or stamp their approval on these massive investments.

“[T]he firm has invested in new applied sciences recorded as (i)ntangible belongings beneath improvement and associated capital advances amounting to 55,200 lakh and 68,585 lakh, respectively. In accordance with Indian Accounting Customary – 36, “Impairment of Belongings”, the administration is required to hold out impairment check of intangible belongings beneath improvement at the least yearly. The administration has not carried out an in depth impairment testing for intangible belongings beneath improvement and associated advances, inter alia, involving unbiased valuation specialists, evaluating impression of competitors on associated enterprise plans and performing sensitivity evaluation of future money flows anticipated from these belongings. Within the absence of such aforementioned impairment evaluation, we’re unable to remark upon changes, if any, which may be required to the carrying values of such intangible belongings beneath improvement and the associated advances,” the auditor noticed, within the firm’s monetary statements for the yr ended 31 March 2021.

Analysts too are scratching their heads on what to make of those investments as Dish TV stopped interacting with them almost two years in the past. The administration final met with analysts on 14 November 2019 when it declared its second-quarter earnings. For now, the one metric Dish TV discloses is that Watcho has been downloaded by greater than 25 million individuals.

Nevertheless, that metric doesn’t say a lot.

“They (Dish TV) saying 25 million downloads is nonsense,” stated a second government, who’s a consultant for a bunch of buyers which collectively personal about 3.2% of Dish TV. “The Watcho App comes pre-installed with all Dish TV connections. So you have got the app however what number of energetic subscribers or how a lot enterprise has come from it or what’s the content material produced by it, is just not identified,” stated the manager, who didn’t wish to be named.

Dish TV has housed Watcho in a wholly-owned subsidiary known as Dish Infra Companies Personal Ltd, which additionally gives help providers reminiscent of offering devices together with set-top packing containers and dish antennas. All buyer help by means of name centres and all restore providers are offered by means of this subsidiary.

Why is Watcho a priority?

From Comcast Corp. within the US to Tata Sky or a Solar Direct right here, no distribution firm is into producing content material. Partly as a result of that’s not the enterprise of a cable distribution firm and partly as a result of a cable distribution firm can’t compete in opposition to the deep pockets of Netflix or Amazon. So why to throw good cash into one thing you aren’t positive the way it’ll form up,” stated the second government, cited above.

To make certain, these are strategic enterprise discussions and open for debate. It’s potential that Dish TV’s administration, led by Jawahar Goel, the youthful brother of Essel group founder Subhash Chandra, has a plan in thoughts. No matter these plans may be, lack of readability over how this cash has been spent is making shareholders uncomfortable.

“Content material manufacturing is a really subjective enterprise. Can we monitor if the corporate says, they paid, say 10 crore, to a star to do an advert. You can’t as a result of we don’t understand how the bills are being booked,” stated the second government cited above. “The auditors have expressed their lack of ability. The administration received’t share any metrics. And your shareholders are asking the board questions on this manufacturing home,” the second government added.

For now, Sure Financial institution can’t examine the cash path inside Watcho because it doesn’t have any illustration on the board of Dish TV.

However that would change if Sure Financial institution manages to win shareholder approval to reconstitute the board on 27 September.

“Look, it’s only incumbent upon any new board to truly do a whole forensic on all such points. Particularly the one which has made stakeholders ask questions,” stated the third government, a board member on two Bengaluru-based firms, who’s conscious of the developments.

Regardless, Sure Financial institution’s fears are an indictment on the repute of Goel, a pioneering determine within the satellite tv for pc broadcast trade, who’s credited with constructing Siti Networks Ltd (a digital cable distribution firm) within the late 90s and early 2000, and who has steered Dish TV since 2007 to make it the nation’s second-largest direct-to-home firm.

So how did Dish TV and Goel get themselves into this pickle?

Familial bonds

Till October 2015, Goel, 66, was the corporate’s managing director, and Chandra was the non-executive chairman. On 27 October, Goel took over the extra duty of chairman after Chandra stepped out.

One essential change within the quarter ended September 2015 that went largely unnoticed was the numerous soar within the promoter shares pledged with collectors. The promoters, who owned 64.45% of Dish TV, had pledged 42% of their shares on the finish of September quarter, up from 30% shares pledged within the earlier June quarter.

A Mint evaluation of the promoter possession and the pledged shares in Dish TV during the last 45 quarters starting March 2009 makes one conclude that this marked a watershed second in Dish TV’s historical past. Starting September 2015, quarter after quarter, for six straight years, the proportion of pledged promoter shares solely stored inching up.

Chandra has stated that each one the shares pledged belonged to Goel, who he has publicly thanked for his assist throughout troublesome occasions.

“The (Essel) Group is extraordinarily grateful to Jawahar Goel, promoter and managing director of Dish TV India Ltd. Goel has prolonged help, within the type of a considerable portion of his fairness within the talked about listed entity, as safety for the credit score services availed by Subhash Chandra Group,” stated an announcement issued on behalf of Ronak Jatwala, official spokesperson of the Subhash Chandra Group, on 22 April 2021.

“The Group is assured and absolutely dedicated to return the talked about safety cowl again to Jawahar Goel and his household,” the assertion added.

Essel Infraprojects, a privately held enterprise of Chandra, wanted massive sums of cash for finishing infrastructure initiatives, together with highway building and highway toll initiatives, that it had aggressively bid for within the first half of the final decade.

By December 2017, twenty-six months after Chandra had moved out of the corporate, 60.25% of promoter-owned Dish TV shares, double of 30.26% in June 2015, had been pledged with collectors.

Inside Dish TV too, the enterprise had began slowing. Its income within the yr ended March 2018 declined 5% to 2,862.6 crore from 3,014.4 crore on the finish of March 2017.

“Airtel DTH and Tata Sky have registered wholesome development over FY15-18 regardless of demonetization, GST (items and repair tax) and FreeDish competitors. Trade prospects are thus attractive,” wrote Himanshu Shah, analyst at HDFC Securities, in a word dated 30 Might 2018.

“DITV’s (Dish India TV Ltd’s) poor efficiency is the results of its personal weak execution led by an amazing deal with prices and merger (with Videocon DTH),” Shah wrote within the word.

A yr later, the implosion of IL&FS, a significant shadow lender within the infra sector, plunged Chandra’s initiatives right into a disaster as refinancing of debt abruptly turned troublesome. A excessive proportion of pledged promoter shares, together with slowing enterprise made Dish TV weak.

However the worst was nonetheless to return.

On 25 January 2019, Dish TV shares sank 33%, erasing about 2,000 crore from its market worth, as a part of the broader rout witnessed in any respect Chandra-promoted firms. This was following a media report of a authorities probe into alleged post-demonetization money transactions involving entities associated to the Essel Group.

Chandra denied irregularities however acknowledged in a two-page word issued to the press then that the Group had made dangerous investments and incorrect bids in sure infrastructure initiatives and likewise apologized to his bankers, non-banking monetary firms and mutual funds.

However by now, collectors had been in no temper to proceed holding shares of Dish TV and different listed firms of Essel Group, and a few of them began promoting shares. By the top of June 2020, the promoter possession in Dish TV had fallen to 23.67%, in comparison with 55% at the beginning of the yr.

The highway forward

Sure Financial institution now needs its two nominee administrators and 5 different unbiased administrators to handle Dish TV, and is urgent the corporate to convey these resolutions earlier than shareholders at its annual common assembly on 27 September.

Sure Financial institution has really helpful Akash Suri, nation head, pressured asset administration at YES Financial institution, and Sanjay Nambiar, common counsel, to be its two nominee administrators. It has additionally nominated Girish Paranjpe, former chief government officer of Wipro Ltd, Vijay Bhatt, previously with KPMG, the consultants, Haripriya Padmanabhan, a lawyer, Narayan Prabhutendulkar, former government director with Hewlett Packard Enterprise India Pvt. Ltd, and Arvind Nachaya, a administration guide, to affix as 5 unbiased administrators.

For now, Dish TV has not agreed to those recommendations and has stated that inducting new board members will be carried out solely after the knowledge and broadcasting (I&B) ministry approves these suggestions.

For that reason, some consider Sure Financial institution’s combat to take management of Dish TV might doubtlessly stretch past 27 September.

Disclosure: The Hindustan Occasions Ltd, the promoter entity of Mint’s writer HT Media Ltd, just lately acquired fairness shares in Dish TV Ltd as a part of its treasury administration operations, in response to inventory trade disclosures.

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