Indian Accounting Research Analyst, Trudence Capital Advisors

Nitin Mangal

Indian Accounting Research Analyst

Trudence Capital Advisors

Trudence Capital Advisors Private Limited is a SEBI-registered Research Analyst, holding SEBI registration number INH000015747. Our firm is dedicated to providing independent and unbiased research on Indian mid to large-cap companies. Trudence Capital is known for its counter-consensus views, with a focus on forensic research and on-ground primary investigations. Our research approach is thorough, involving detailed analysis of accounting practices and governance, alongside extensive channel checks.

Independent & Unbiased Research

Forensic Accounting

Zee Media Corporation / Forensic Accounting

The Zee group has arguably been a frontliner news for most of the past week. Led by Subhash Chandra Goenka's Essel Group, Zee companies have been bearing a brunt recently of several potential malpractices. We had already saw how shareholder activism has gained prominence in the country through <a href="https://www.smartkarma.com/insights/vedanta-delisting-failure-the-upsurge-of-shareholder-activism-in-india" target="_blank" data-smartkarma-citation="insights:44110" rel="noopener">Vedanta Delisting Failure: The Upsurge of Shareholder Activism in India?</a> and <a href="https://www.smartkarma.com/insights/jspl-shareholder-activism-gains-credence" target="_blank" data-smartkarma-citation="insights:51954" rel="noopener">JSPL- Shareholder Activism Gains Credence</a>. 
Latest shareholder activism surrounding the group especially <a href="https://www.smartkarma.com/entities/zee-entertainment-enterprises" target="_blank" data-smartkarma-citation="entities:19466:1" rel="noopener">Zee Entertainment Enterprises (Z IN)</a> was another high-profile case, but a more salty one compared to earlier examples, mainly because of the suddenness and the underlying reasons. The shareholder activism and non-tolerance of the investors was one of the key reasons which possibly triggered the merger. 
Through the shareholder activism it is evidently known that the shareholders are of the opinion of not having promoters and related management boss the company. In this insight, we do not dwell on the recent activism and related story of Zee Entertainment, but a hidden skeleton pertaining to <a href="https://www.smartkarma.com/entities/zee-media-corporation-ltd" target="_blank" data-smartkarma-citation="entities:8000:1" rel="noopener">Zee Media Corporation (ZEEN IN)</a>. which has a plausible connection to the promoters.
The reason why this is important is that Zee Media  is another prominent group company and according to some media articles, Zee Media might be one of the next companies in which promoters might face ire in form of activism.

The Zee group has arguably been a frontliner news for most of the past week. Led by Subhash Chandra Goenka's Essel Group, Zee companies have been bearing a brunt recently of several potential malpractices. We had already saw how shareholder activism has gained prominence in the country through Vedanta Delisting Failure: The Upsurge of Shareholder Activism in India? and JSPL- Shareholder Activism Gains Credence. 
Latest shareholder activism surrounding the group especially Zee Entertainment Enterprises (Z IN) was another high-profile case, but a more salty one compared to earlier examples, mainly because of the suddenness and the underlying reasons. The shareholder activism and non-tolerance of the investors was one of the key reasons which possibly triggered the merger. 
Through the shareholder activism it is evidently known that the shareholders are of the opinion of not having promoters and related management boss the company. In this insight, we do not dwell on the recent activism and related story of Zee Entertainment, but a hidden skeleton pertaining to Zee Media Corporation (ZEEN IN). which has a plausible connection to the promoters.
The reason why this is important is that Zee Media  is another prominent group company and according to some media articles, Zee Media might be one of the next companies in which promoters might face ire in form of activism.

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Shareholder activism is on the rise in India. Institutional shareholders are making their vote count. Proxy advisor firms are also playing a role in guiding institutions to leverage their voting rights prudently. Over the past few months, we saw several instances of activism, mostly through adverse voting and complaining on public forums like earnings call. In a couple of cases, large shareholders (&gt;10% ownership) have also used their rights under Companies Act to call an extraordinary general meeting (EGM) to push for change of board and management.
In our detailed insight below, we discuss many such instances that transpired over the past few months. We also discuss our key takeaways for the Indian markets from this uprising activism.

Shareholder activism is on the rise in India. Institutional shareholders are making their vote count. Proxy advisor firms are also playing a role in guiding institutions to leverage their voting rights prudently. Over the past few months, we saw several instances of activism, mostly through adverse voting and complaining on public forums like earnings call. In a couple of cases, large shareholders (&gt;10% ownership) have also used their rights under Companies Act to call an extraordinary general meeting (EGM) to push for change of board and management.
In our detailed insight below, we discuss many such instances that transpired over the past few months. We also discuss our key takeaways for the Indian markets from this uprising activism.

The Rise of Shareholder Activism in India

Few days back <a href="https://www.smartkarma.com/entities/zee-entertainment-enterprises" target="_blank" data-smartkarma-citation="entities:19466:1" rel="noopener">Zee Entertainment Enterprises (Z IN)</a> has announced that board of directors has given in-principle approval for the merger between ZEEL and Sony Pictures Networks India. The new of this merger was already rumored in the market since quite some time, however, the timing of this announcement is quite interesting.
On September 11, 2021, two investors of the company Invesco Developing Markets Fund and OFI Global China Fund Llc has asked board to conduct Extra-ordinary general meeting for possible removal of CEO of the company Mr. Punit Goenka and appointment of six independent directors.
This insight briefs few important clauses in the merger which might be consequential for both the promoters and shareholders.

Few days back Zee Entertainment Enterprises (Z IN) has announced that board of directors has given in-principle approval for the merger between ZEEL and Sony Pictures Networks India. The new of this merger was already rumored in the market since quite some time, however, the timing of this announcement is quite interesting.
On September 11, 2021, two investors of the company Invesco Developing Markets Fund and OFI Global China Fund Llc has asked board to conduct Extra-ordinary general meeting for possible removal of CEO of the company Mr. Punit Goenka and appointment of six independent directors.
This insight briefs few important clauses in the merger which might be consequential for both the promoters and shareholders.

Specialist in Indian Banking and Economic Research

Hemindra Hazari

The Securities and Exchange Board of India (SEBI)’s <a href="https://www.sebi.gov.in/enforcement/orders/aug-2021/order-in-the-matter-of-kotak-mahindra-asset-management-company-ltd-_52130.html" target="_blank" rel="noopener">order</a>  penalising Kotak Mahindra Mutual Fund (Kotak MF), a subsidiary of <a href="https://www.smartkarma.com/entities/kotak-mahindra-bank-ltd" target="_blank" data-smartkarma-citation="entities:126:1" rel="noopener">Kotak Mahindra Bank (KMB IN)</a> (KMB) provides an in-depth insight normally unavailable to the public on how imprudently investment decisions are taken by so called professionals in marquee firms who are managing public funds in a fiduciary capacity. The indictment by SEBI shows Kotak MF in a poor light and also casts a spot light on Kotak Mahindra AMC's high profile chairman, Uday Kotak who is also founder-CEO, KMB.Even though investors ultimately (after some delay) recovered their funds, the SEBI order exposes the unprofessional conduct of the concerned debt fund managers and the Investment Committee (IC), in Kotak MF in investing in dubious debt instruments of companies which had no financial ability to pay back the principal and where equity shares was the only security. That such a high-risk transaction conformed to the investment policy of  Kotak MF is a cause for significant concern for all debt investors of Kotak mutual fund schemes. In a shocking revelation, thoroughly exposing Kotak MF’s Investment Policy, the SEBI order <a href="https://www.sebi.gov.in/enforcement/orders/aug-2021/order-in-the-matter-of-kotak-mahindra-asset-management-company-ltd-_52130.html" target="_blank" rel="noopener">notes</a>  that the company’s IC on March 7, and May 18, 2016 was <blockquote>not aware of the issuer entity even on the date of approving the proposal to invest in the ZCNCDs [zero coupon non-convertible debentures]. (para 40, p. 34) </blockquote>Such was the professionalism on Kotak MF’s IC that they approved an investment in a corporate entity whose identity they did not know and consequently had no clue about its financials. They did so as documented in its approval note solely on the belief that,<blockquote>repayment of our exposures will, in all probability, be funded through a refinance. We take comfort from the reputation and track record of Essel Group in general and fundamentals, liquidity and performance of Zee shares. (ibid)</blockquote>Although KMB has historically reported strong asset quality, an added concern is that Kotak AMC is a subsidiary of the bank and when Kotak MF  follows such appalling credit appraisal/underwriting practices under its chairman Uday Kotak, can the bank where Kotak is the founder-CEO also be following similar practices where belief overrides financial fundamentals and where the decision-makers invest blindly?The SEBI order is an eye-opener in how investment decisions are taken at mutual funds and as Uday Kotak is the chairman of Kotak AMC, regulators especially, SEBI and the Reserve Bank of India should consider whether such conduct conforms to the fit and proper criteria for managing public money in a fiduciary capacity.

The Securities and Exchange Board of India (SEBI)’s order  penalising Kotak Mahindra Mutual Fund (Kotak MF), a subsidiary of Kotak Mahindra Bank (KMB IN) (KMB) provides an in-depth insight normally unavailable to the public on how imprudently investment decisions are taken by so called professionals in marquee firms who are managing public funds in a fiduciary capacity. The indictment by SEBI shows Kotak MF in a poor light and also casts a spot light on Kotak Mahindra AMC's high profile chairman, Uday Kotak who is also founder-CEO, KMB.Even though investors ultimately (after some delay) recovered their funds, the SEBI order exposes the unprofessional conduct of the concerned debt fund managers and the Investment Committee (IC), in Kotak MF in investing in dubious debt instruments of companies which had no financial ability to pay back the principal and where equity shares was the only security. That such a high-risk transaction conformed to the investment policy of  Kotak MF is a cause for significant concern for all debt investors of Kotak mutual fund schemes. In a shocking revelation, thoroughly exposing Kotak MF’s Investment Policy, the SEBI order notes  that the company’s IC on March 7, and May 18, 2016 was not aware of the issuer entity even on the date of approving the proposal to invest in the ZCNCDs [zero coupon non-convertible debentures]. (para 40, p. 34) Such was the professionalism on Kotak MF’s IC that they approved an investment in a corporate entity whose identity they did not know and consequently had no clue about its financials. They did so as documented in its approval note solely on the belief that,repayment of our exposures will, in all probability, be funded through a refinance. We take comfort from the reputation and track record of Essel Group in general and fundamentals, liquidity and performance of Zee shares. (ibid)Although KMB has historically reported strong asset quality, an added concern is that Kotak AMC is a subsidiary of the bank and when Kotak MF  follows such appalling credit appraisal/underwriting practices under its chairman Uday Kotak, can the bank where Kotak is the founder-CEO also be following similar practices where belief overrides financial fundamentals and where the decision-makers invest blindly?The SEBI order is an eye-opener in how investment decisions are taken at mutual funds and as Uday Kotak is the chairman of Kotak AMC, regulators especially, SEBI and the Reserve Bank of India should consider whether such conduct conforms to the fit and proper criteria for managing public money in a fiduciary capacity.  

SEBI Exposes Kotak Mahindra Mutual Fund’s Policy of Investing Blindly

External broker reports(aggregated public sources), Ashika Research

Ashika Research

External broker reports(aggregated public sources)

Equity Bottom-Up

Zee Entertainment Enterprises / Equity Bottom-Up

<div class="content-highlight">Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</div>

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Ashika - Stock Picks - Zee Entertainment Enterprises Ltd. - July 2021

India

Zee Entertainment Enterprises Limited operates as an entertainment company. The Company produces and develops films, serials, game shows, and children's programs. Zee also produces and exports entertainment software for transmission on its ZEE TV channel. Zee Entertainment Enterprises serves customers in India.

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Zee Entertainment Enterprises (Z IN)

Zee Media: Is There a Hidden Skeleton?

After what happened with Zee Entertainment, Zee Media (another promoter entity) could face brunt of activism especially given that there is another...

Nitin Mangal

The Rise of Shareholder Activism in India

Shareholder activism is on the rise in India with several recent instances where investors have raised concerns through voting rights and EGMs as...

Ankit Agrawal, CFA

ZEE-Sony Merger: A Cloudy Sky?

This insight briefs few important clauses in the merger which might be consequential for both the promoters and shareholders. The timing of the...

Nitin Mangal

SEBI Exposes Kotak Mahindra Mutual Fund’s Policy of Investing Blindly

When Kotak MF follows poor underwriting under its chairman Uday Kotak, can KMB also be following similar practices where belief overrides...

Hemindra Hazari

Ashika - Stock Picks - Zee Entertainment Enterprises Ltd. - July 2021

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general...

Ashika Research

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