The Subhash Chandra saga explained

**Shrehith Karkera** (0:01)
Hello folks, you're tuned in to Finshots Daily. If you're new here, welcome. And if you're returning, welcome back. In today's episode, we explain how the Essel Group's financial crisis unfolded and why the insolvency case involving its promoter has sparked a major legal debate among Indian lenders.
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There was a time when evenings in many Indian households followed a predictable routine. Dinner would be served just before the prime time. The TV remote would mysteriously disappear into the hands of our parents or grandparents, and they were tuned into Zee TV to watch Sare Gama or one of the countless daily soaps that were omnipresent in our living rooms for years.
Behind Zee's success was Subhash Chandra, one of India's most successful media entrepreneurs. He built the country's first private satellite television network at a time when cable TV itself was a novelty.
And over the years, Zee grew into one of India's largest media companies. But while millions watched Zee's success unfold on television, something else was going on behind the scenes. A series of ambitious bets outside the media business, funded largely with borrowed money, slowly turned one of India's strongest business groups into one of its most indebted. What followed was years of asset sales, court battles, failed mergers, lender negotiations, and one of the longest corporate debt resolution stories in recent Indian history. So, how did the man who built Zee end up fighting to save his empire?
Well, the trouble became public in January of 2019, when Subhash Chandra formally acknowledged that the Essel Group, which is Zee's parent company, you can also call it the Zee Group, faced serious liquidity constraints. The group accumulated approximately 45,000 crore rupees in total borrowings. This debt funded expansions into infrastructure, road construction, power transmission and solar energy. To secure these credit facilities, promoters pledged their equity shares in Zee Entertainment Enterprises Limited, or Zeal, as collateral. As long as the businesses continued to perform and the share price remained healthy, this arrangement was manageable. But once the share price began following, the entire structure came under pressure. The immediate trigger was a report published on January 25th, 2019, linking Essel to Nityank Infrapower and Multiventures, an entity being investigated by the Serious Fraud Investigation Office. This report sent shares of Essel Group companies crashing. Zeal fell more than 26% that day, while Dish TV, also owned by Essel, dropped almost 33%.
And because the promoter had pledged his shares as collateral for loans, the sharp fall in their value meant lenders could ask for more collateral or repayment. This added to the group's financial troubles. What followed was essentially a race to unwind the empire built over 3 decades. Chandra committed to reducing debt by around 13,000 crore rupees through asset sales. Essel sold infrastructure, renewable energy and other assets, while Chandra negotiated with lenders to gradually reduce the group's borrowings. As a side note, he now claims that the borrowing entities for which he had provided personal guarantees have repaid around 43,000 crore rupees of the original 45,000 crore rupees. On the surface, that might suggest the crisis is largely resolved. But another problem would continue long after corporate debt started coming down, Chandra's personal guarantees. This is where the story gets considerably more complicated. When Essel Group companies borrowed money, several lenders obtained personal guarantees from Chandra. In simple terms, Chandra had effectively told the lenders, if the companies failed to repay certain loans, he could personally be held responsible for those obligations. So even if the underlying companies were gradually reducing their debt, lenders could still pursue Chandra for amounts covered by those guarantees when loans remained unpaid. And that is exactly what India World's Housing Finance did. In 2002, it initiated personal insolvency proceedings against Chandra under Section 95 of the Insolvency and Bankruptcy Code, or the IBC. In simple terms, this allows a lender to approach the National Company Law Tribunal and ask it to start insolvency proceedings against someone who has personally guaranteed a company's loan. But getting Chandra into the insolvency process was only the beginning. Once the proceedings started, the bigger question was, how much could he actually be made to repay? The lenders had their claims, Chandra had his own assessment of what he owed, and the insolvency process had to determine what could be realistically recovered from him personally. That is where the numbers became surprising, and the case has now produced a striking outcome. A few days ago, the NCLT approved a repayment plan under which Chandra will pay 6.25 crore rupees to creditors, along with another 25 lakh rupees towards the insolvency process against the 22,006 crore rupees of admitted claims in his personal insolvency proceedings. On the face of it, that works out to be a haircut of around 99.97%.