First, remind me about Chandra…

About Chandra: The son of a grain merchant, he dropped out of college to pay off family debts. Chandra first made his money making laminated tubes. But his true claim to fame is his decision to start India’s first satellite television channel in 1992—Zee TV. Chandra also was the first to set up a satellite phone company in India and a private cricket league—long before IPL came along. Known for staying on the right side of power, his autobiography was released by none other than Prime Minister Modi in 2016—the same year he became a Rajya Sabha MP.

About Zee: Chandra is most often described as the father of Hindi television. At a time when others were selling out to foreign partners, he turned down Rupert Murdoch and built a formidable TV empire with 79 channels and a massive 1.3 billion global viewership. But it all started to go sour in 2019:

• Chandra’s made a big bet on infrastructure—which went very wrong in 2018, when the big financier of the industry, IL&FS Group, went belly up. 
• Zee’s parent company Essel Group owed a debt of Rs 130 billion (13,000 crore) and was staring at the prospect of defaulting on Rs 70 billion (7,000 crore) in loans.
• In 2019, the global fund Invesco-Oppenheimer came to the rescue—picking up a 11% stake in Zee for Rs 42.24 billion (4,224 crore). 
• Invesco’s share of Zee shot up to nearly 18%—making it the largest shareholder—while the Chandra family’s stake shrank from 41.6% to less than 5% within a single year.
• Chandra exited his post as chairman of the Zee’s board, but his son Punit Goenka remained in charge as CEO as part of the deal. And everyone seemed happy at the time. 

Ok, so what went wrong...

Here’s how this battle royale unfolded:

The Covid effect: Zee’s stock price tumbled last year due to the collapse in advertiser revenue—triggered by the pandemic. The value of Invesco’s investment in Zee dropped by 68%—and the losses stood at 55% as of September 15.

First shots fired: All seemed quiet for a year until September 11 when Invesco shot off a letter to Zee demanding the removal of three directors—including CEO Punit Goenka—from the board. It suggested the appointment of six independent directors—and called for an “extraordinary general meeting” of shareholders to consider its demands. But it never laid out exactly why it was unhappy.

Here comes Sony: Within a week, Zee announced a merger with Sony, and the terms were astonishingly sweet. Sony Pictures Networks India would pay $1.6 billion (Rs 120.6 billion) for a 53% stake in the new entity. Goenka would stay on as CEO. And most wondrously, Chandra’s family would raise their stake to 20%—though the deal never specified exactly how this would happen. 

Chandra goes all nationalist: On October 1, the family rejected the demand for an extraordinary shareholder meeting—calling it “invalid and illegal.” While Invesco turned to the National Company of Law Tribunal to force Zee to call the meeting, Chandra went on a PR offensive. He accused Invesco of “trying to take over Zee in a clandestine manner”—comparing it to the East India Company trying to seize a network that is “a part of the lives of crores of Indians.” A sentiment that was echoed by Bollywood supporters, including producer Boney Kapoor who tweeted: 

​​”Zee which was first Indian channel promoted by Indian nationalist ... (is) now hounded by American and Chinese investors. Pray Zee Entertainment remains in original Indian entrepreneur's passionate hands.”

Actually a Japanese company’s “passionate hands,” but why quibble with details. Even an array of religious organisations like Sadhu Samaj came to Chandra’s defence.

Where we are now: The NCLT has given Zee until October 22 to respond to Invesco’s demand for a shareholder meeting. And even if such a meeting were to be held, it isn’t clear who the other 350-odd shareholders—who own 68% of the company—will back.

Point to note: According to Mint, Invesco’s decision to go to war was influenced by Yes Bank—a significant shareholder in the first family’s other big television holding, Dish TV. On September 6, the bank demanded the replacement of five directors—including managing director Jawahar Goel, the younger brother of Chandra. 

Why is Invesco so hell-bent against Chandra?

When the merger with Sony was announced, many thought Invesco would be happy—Zee’s shares surged by 32%, and the Japanese presence would likely ensure better corporate governance. But apparently not. In an open letter to shareholders, Invesco finally revealed its list of grievances:

• It flagged the company’s “governance failures and prolonged underperformance”—and pointed to the fact that the family has presided over “shareholder value destruction” at a time when the Indian stock market’s been soaring.
• Invesco alleges that the Chandras owe a lot of money thanks to their other holdings—and “has permitted Zee’s deep entanglement with the financial distress of its founding family.”
• No, Invesco is not happy about the Sony deal—especially since it isn’t clear how the Chandras will raise their stake to 20%. And this: “we currently consider it to be no more than camouflage on the part of Zee to divert and distract from the primary issues before the company.”

To be fair: Many industry experts also say the Sony deal is an “eyewash”—since it is only a non-binding agreement for now. There’s no assurance that it will ever go through—especially since it needs the consent of Invesco, which is the largest shareholder.

Punit Goenka’s response: Yesterday, he too sent an open letter to shareholders—claiming that the real reason Invesco is upset is because he rejected a deal it had proposed back in February. Under it, an unnamed “large Indian group” would have taken control of Zee after infusing Rs 140 billion (14,000 crore) in cash.

The bottomline: A Zee investor told Mint, “[W]e believe this could be the start of what could become one of the ugliest battles between an investor and promoter in India’s corporate history.” We agree.

Reading list

Reuters has a basic explainer on the Invesco-Chandra battle. Mint tries to figure out who the Zee shareholders will back. Fortune takes a critical look at the ‘too good to be true’ Sony deal. Read the full text of Invesco’s letter here. MoneyControl makes a strong argument in favour of Chandra. Mint also has the latest on the Dish TV drama. For more on Chandra’s career and personality, read Forbes or a more gossipy take in The Print.