Differences crop up among small investors on YES Bank’s proposal to oust Dish TV board

Surabhi Mumbai | Updated on September 14, 2021

Proxy advisory services firm SES disagrees with lender on removal of directors but agrees on need for change in the board

There is a difference of opinion among smaller investors on YES Bank's proposal to oust the board of Dish TV.

Proxy advisory services firm SES said YES Bank has not given sufficient reason for its proposal. It has also disagreed with the private sector lender’s contention that the directors ought to be removed for approving the rights issue with intention to dilute the bank’s shareholding but has partly agreed with its contention of disproportionate representation of promoters on the board.

It has, however, underlined that there are serious governance issues at Dish TV and those responsible for it must be penalised. However, there is a difference in penalising wrong doers and penalising the company itself.

SES disagreement

“SES disagreement emanates from the following — a rights issue is the only medium of capital raising, which in fact protects against any dilution to all, unless one forgoes the right. If YES Bank does not want to infuse capital in the company, in that case every other option for raising capital will ultimately lead to dilution of YES Bank’s stake in the company,” SES said in its report on Dish TV ahead of the company’s annual general meeting on September 27.

Noting that the board’s decision to opt for a rights issue was based on the recommendation of the sub-committee of independent directors, SES said by choosing to remove them as well, YES Bank has put a question mark on their independence, prudence and capability.

Independent directors

Accordingly, on YES Bank’s special notice for removal of directors, SES said there exists no reason for removal of the company’s independent directors — Rashmi Aggarwal, Bhagwan Das Narang and Shanka Aggarwal.

However, it has agreed with the lender’s proposal to remove Dish TV promoter Jawahar Goel from his position as CMD. It pointed out that the promoters are in control of the company with only 3.57 per cent of unencumbered equity.

SES is also against YES Bank’s proposal to appoint new directors pointing out that the proposed directors can only be appointed to the board after approval of the Ministry of Information and Broadcasting.

The firm has also advised shareholders to vote against Dish TV’s resolution to re-appoint Ashok Mathai Kurien, Director.

“SES is of the view that the Audit Committee has failed in its duty to provide a true and fair representation of the company's financial statements to its shareholders,” it said, adding that as Kurien is part of the Audit Committee, SES is raising a governance concern with respect to his reappointment.

InGovern’s view

But with huge under performance by the company, proxy advisory services firm InGovern said there is nothing wrong with the proposal to remove the Dish TV promoter.

“In the case of both Zee and Dish TV, the promoter has less than five per cent shareholding and there is huge under performance by the companies. The promoter wants to continue to be in control but does not seem to have a good plan for the future.

“YES Bank, with a shareholding of 25 per cent in Dish TV, is interested in a change in the board. There is nothing wrong with it. Shareholders are just holding the board accountable for performance of the companies and not preventing related party transactions,” Shriram Subramanian, Founder and MD, InGovern, told BusinessLine.

The lender’s proposals are, however, pending approval from the Ministry of I&B.

YES Bank, which holds over 25 per cent stake in Dish TV, has called for removing the company’s entire board on the grounds that it is purportedly acting at the behest of certain minority shareholders holding merely 6 per cent of shares in the company.

The bank did not respond to an e-mail query from BusinessLine on the issues.

‘Not legally tenable’

SES said while it would want to see a change in the Dish TV board, it is constrained as YES Bank’s resolutions are neither legally tenable nor are they in the interest of company, unless a solution to vacuum in the board is found.

YES Bank could have proposed just the appointment of new directors without removal of existing ones and made their appointment subject to approval of the Ministry of I&B. Once approval is obtained, placed for further resolutions for removal (which might not have been required), in all probability, existing directors would have seen the writings on the wall and would have bowed out voluntarily, it noted.

Published on September 14, 2021

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