On 2nd October 1992, Subhash Chandra started Zee TV with its first broadcast. Paving the way for other private companies, he became a pioneer by launching the first Hindi-language subscription channel in India and came to be known as ‘The Father of Indian Television’.
Zee is a content powerhouse with a 20 percent share of India’s traditional television viewing market. The network also boasts 35 percent EBITDA margins despite heavy investment in Zee5, a fast-growing digital app. Zee Entertainment boasts 1.3 billion viewers across 173 countries through its 78 channels and 4,800 movie titles. 

In the late 70s India had problems of hard currency and was going through a huge deficit. Essel Group entered into bilateral trade with a few countries, Russia being one of them. In 1981 Essel group also participated in this Bi-Lateral Trade activity for exporting agricultural commodities to the Soviet Union, more so rice. The zero taxation policy of the Indian Government on export profits meant huge cash flows for the group. This led to the establishment of various Essel group of companies in the fields of Media & Entertainment, Education, Packaging, Financial Services and Infrastructure (including ZEE) which made him a billionaire media baron.

Nityank Infrapower and Multiventures Pvt. Ltd. and Demonetization

The Wire, an independent online news media website, in its investigation through publicly available documents allege that through a complex web of numerous interlinked shell companies, Essel group was indirectly engaged in financial transactions of billions of rupees. 

Nityank infrapower, formerly known as Dreamline Manpower Solutions was incorporated in 2012 by three individual businessmen, all based in Secunderabad. In December 2013, the entire shareholding of the company was transferred in favour of two other individuals, who are Mumbai-based and they joined as directors of the company. Later that year, Dreamline merged with another company called Umapathi Trading Private Limited.

Though Dreamline’s CIN shows it as a Hyderabad-based company, it is registered with a wrong address. Over the years, its ownership has changed at least once.

Most of the companies involved have remained largely dormant and were financed through making Limited Liability Partnerships (LLPs), taking loans, non-convertible debentures (NCDs), optional convertible debentures (OCDs) etc and whose only purpose was to serve as a channel for evasive transactions.

The Wire’s examination of publicly available documents show Nityank and a group of shell firms carried out financial transactions that involved a few firms associated with the Essel Group of Subhash Chandra between 2015 and 2017.

The Wire’s examination of corporate filings shows that Dreamline is also part of a group of shell companies and LLPs that carried out financial transactions involving various Essel or Essel-affiliated entities in 2015-17.

While shell companies can also be used legally, the position that the BJP-led government took post demonetization was to crack down on these transactions and heavily regulate these companies in order to curb black money. 

The months that preceded and succeeded the demonetisation are the ones that saw a huge amount of transactions in Dreamline, involving crores of rupees. The company deposited Rs 3,177.96 crore in cash between November 8, 2016 and December 31, 2016.

In March 2018, the Centre revealed through a reply in the Lok Sabha that it had ordered an investigation, through the Serious Fraud Investigation Office (SFIO), into the affairs of 575 companies on account of alleged fraud.

The Serious Fraud Investigation Office (SFIO) is currently probing a company called Nityank Infrapower (formerly Dreamline Manpower), for deposits of over Rs 3,000 crore made just after demonetisation (November – December 2016). The SFIO’s investigation has not concluded nor has any interim action been taken in the year that has elapsed.

In their investigation, they try to raise the question of how Nityank, an obscure and unknown company, be involved in huge amount of transactions with giant like Essel.

Videocon D2H-Dish TV Merger

In November of 2016, it was announced that Videocon D2H services and Dish TV will merge into one company with the deal finalizing at last on 22nd March 2018 after going through various approval processes. Nityank Infrapower Pvt. Ltd. came as a promoter on board by subscribing to the non-convertible Debentures of a firm called Hindustan Oil Ventures Pvt. Ltd. (HOVL) for Rs 1626 crores, which is majorly owned by the Videocon group’s Dhoot family.

Domebell Electronics India Pvt. Ltd., a company involved in hypothecation deed in favour of Catalyst Trusteeship Limited with HOVL, in legal documents stated that D2H shares were placed in Nityank’s custody so that they could be usurped by Essel if the merger were to fail.

In mid 2018, a financial creditor took Domebell to the National Company Law tribunal for bankruptcy lawsuit. This is when the legal battle between Videocon and Essel started. 

Nityank approached the NCLT and filed an intervention application which alleged that Domebell planned on pledging some Videocon D2H shares to a third-party. And that these shares that were pledged actually belonged to Nityank.

In response, Domebell and other Videocon group companies approached the Delhi high court in August 2018, alleging that Nityank was actually an Essel Group company and that it had unlawfully invoked a pledge on Videocon D2H shares that were placed as security with it in the event a merger with Dish TV were to fall through.

It sought an injunction from the court restraining the allotment of shares to Nityank in the merged Dish TV entity. The court hearings are still continuing.

The Paradise Papers

Leaked Appleby records show that to repay the debt and finance Veria Lifestyles (A company owned by Subhash Chandra), Chandra pledged shares of ZEE Entertainment Enterprises Limited (ZEEL) to offshore companies of the Essel group. 

Appleby records show that a $62-million loan was taken from Credit Suisse “to finance existing offshore promoter debt” in 2013. This loan was given to SMTP Ltd (Mauritius) which, in turn, provided a convertible loan to Essel Holdings Limited (Mauritius), a company “indirectly wholly owned and controlled by” Chandra.

The loan, Appleby records state, was “indirectly backed by 46 million fully paid up equity shares” of Zee held by Essel Holdings Limited (EHL), making prepayment necessary “upon fall in stock price of Zee by more than 40% since inception”. This refers to the shares that Essel Holdings Limited, as one of the promoters, continues to hold in ZEEL since 2011.

 The pledging of promoter shares since February 2012 do not show the pledging of 46 million shares in 2013 in the BSE records made by ZEE. This $62-million loan, records show, was ostensibly meant to refinance a $55-million loan availed of by EHL three years ago.

Other Company names like Delgrada Limited, Borth Company Limited, Asia Today Limited, Erith International Limited etc, which all had direct or indirect connections to Chandra, also came to light from the leaked documents.  The response from Subhash Chandra’s office, when asked if ZEEL disclosed the pledging of promoter shares to shareholders and regulators by The Indian Express is defensive and opaque to say the least.  

The IL&FS Fiasco

When the Economic ties reported in December of 2018 about Nityank, links were starting to emerge between Nityank and Essel Group. Then on 24th January 2019, The Wire published its piece detailing the alleged involvement between the two companies. This story is supposed to have sent shockwaves into the Dalal Street and hence on 25th January 2019, the prices of stocks related to ZEE plummeted upto 33% suffering a loss of Rs 13352 crores in market valuation, with BSE seeking clarification from Dish TV about the alleged links.

However, there were other factors involved namely the IL&FS crisis, investing in long term projects of waste-management plants, road, infrastructure, solar power etc along with some alleged ‘Negative Forces’. The merger between Dish TV and Videocon D2H also played a part in increasing their troubles. The recent IL&FS Group’s 12.8 billion dollars bankruptcy is largely responsible for this situation as all these long term projects were more or less financed by taking short term loans from the aforementioned company, which caused the debt to rollover and raise insurmountably. 

As of March 2017, debt of 170 billion rupees across 87 companies is estimated by BloombergQuint. For these diversification of investments resulting in debt, the collateral in most cases were shares of their successful, publicly traded operating companies.  

The Response

After the plunge, the group released statements on 25th and 27th of January, denying the allegations. Subhash Chandra released an open letter, apologising to their lenders, bankers, NBFCs and mutual funds for not performing according to their expectations and asking them to not act in “an anarchical  manner and maintain patience”.

Chandra being in damage-control mode, is putting half of his shares in ZEEL up for sale in an effort to create liquidity and pay off the debts. He possesses 41.62% stake in ZEEL. His efforts seemed to have worked at least momentarily as the group were able to reach an understanding with 97% of its lenders to hold on to their stock for a period of three months as they try to find potential suitors to buy their stake. 

There’s no confirmed bidder yet, but according to a report in the Business Standard, Zee may be of interest to Amazon, Apple Inc., Tencent Holdings Ltd., AT&T Inc., Singapore Telecommunications Ltd., Comcast Corp. and Sony Pictures Entertainment Inc.

Mukesh Ambani’s Reliance Jio Infocomm Ltd is also being considered as they plan to take on International Competition from Amazon, Hotstar, Netflix etc in a race to gain dominance over the demand of digital video in India.  They have also planned to sell their debt ridden assets on the market to make focused and clear changes in their action plans moving forward.  

The TV mogul has also put a chunk of his road portfolio on the block, though with the beleaguered IL&FS also looking to offload its transport investments, buyers are spoiled for choice. It’ll be easier to deleverage by selling Zee than by disposing of a bunch of highways. If the pressure to come up with liquidity forces Chandra to cede control of his TV empire, then the new owner will have the deadbeat infrastructure financier IL&FS to thank.

In response to the claims made by The Wire in their piece, the company has denied all the allegations and has filed a defamation lawsuit against the organization. 

Considering the group’s ties with numerous companies, the propagandist and ignorant tone of Chandra’s statements made in the past, his close ties to the BJP-government, his forays into various sectors and countries, their philanthropic deeds and organizations, the contradictory quality of programming on his numerous channels along with them being the sponsors of the biggest Literature Festival in India i.e. The Jaipur Lit Fest and numerous other similar events, the end message of the company is quite clear,’ We go where profit is’. This view is in line with all too big to fail similar companies, where there will never be any accountability or transparency from their part until they realize it’s resulting in losses.

Sources : The Print, NDTV, Zee News, The Indian Express, The Economic times, Asianage,, Business Today.

Image Sources : The Indian Express, Zee News

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