Dish TV India Ltd decided to write off about 15% of its investments in its OTT streaming app Watcho, a move which some shareholders said underscores the argument made by the largest shareholder Yes Bank Ltd, which was peeved over these investments and started its fight to push for a promoter change in the satellite-TV provider in September last year.
On Monday, Dish TV disclosed that it had agreed to write off ₹203 crore invested in Watcho even as it additionally recognized ₹2,334.57 crore in impairment-led losses with regards to the Videocon D2H merger in 2016.
These twin impairment charges pushed Dish TV to post ₹1,919.7 crore losses during the January-March period as against ₹80.21 profit in the October-December quarter.
Mint first reported how Dish TV’s ₹1,378 crore investments in Watcho in the financial years 2020 and 2021 had become a sticking point with Yes Bank, in the edition dated 15 September.
A decision to write off its investments, according to two executives privy to the developments, is because Dish TV needs shareholders to approve its financial statements, absent of adverse remarks by the auditor, after investors in December had rejected the resolution.
“Shareholders had rejected from approving Dish TV’s financial report as the auditor had made qualifying remarks on the investments in Watcho and also because it had not done the mandatory impairment test with regards to the Videocon D2H business,” said an investor, who owns more than 1% shares of Dish TV. “Now the auditor has not made any qualifying remarks after the company decided to write off these investments. So Dish TV wants to get its financials approved by the shareholders in the AGM (Annual General Meeting)”
But before the AGM, a bigger test lies ahead of the Board, led by chairman and managing director Jawahar Goel.
Shareholders of Dish TV will vote in an extraordinary general meeting on 24 June to re-appoint Goel as managing director, Anil Dua as director and to appoint Rajagopal Venkateish as an independent director.
Dish TV got a stinging rebuke the last time it sought shareholder nod for the re-appointment of director Ashok Kurien in December last year with 79% of investors rejecting his candidature.
Kurien resigned, leaving the company with five directors on its board.
“This decision to write-off investments in Watcho, which is the first (since it was set up in 2019), just reaffirms our position that there is no transparency in how this money was being used to produce original content,” said an executive at Yes Bank. “We remain confident that most shareholders will again vote against the three director reappointments”
An email sent to Yes Bank seeking comment went unanswered.
Goel is the younger brother of Essel group founder Subhash Chandra, and owns 5.93% of Dish TV.
Chandra on Tuesday filed his nomination from Rajasthan for the elections to Rajya Sabha, the Upper House of Parliament as an Independent backed by the BJP.
In the past, Dish TV’s statutory auditor, Walker Chandiok & Co. LLP, the Indian affiliate of audit firm Grant Thornton LLP, had cited its inability to stamp its approval on investments in Watcho and on the quality of assets bought from Videocon D2H.
An adverse remark by the auditor made Yes Bank, which owns 25.63% of Dish TV, question if the company was being run well.
Not convinced with Dish TV’s response, Yes Bank took an activist investor approach when it first sent a letter to Dish TV in September last year, demanding reconstitution of the board. Yes Bank wanted to remove five of the six directors, including chairman Goel, and sought the induction of seven members.
Dish TV, which denies these allegations of lack of corporate governance, argued that Yes Bank is looking to take control of the company. After Dish TV rejected the lender’s demand, Yes Bank called for an extraordinary general meeting. Dish TV rejected this demand too. Subsequently, both Yes Bank and Dish TV have sought courts to adjudicate.
“As per the applicable accounting standard, the impairment testing of the intangibles is undertaken once every year,” said a spokesperson for Dish TV. “Accordingly, the said exercise was conducted for FY 21-22 for which advise from independent valuers were also obtained”
Dish TV did not comment on why it agreed to write off some of its investments in Watcho.
The company denied that it had agreed to recognize impairment-related charges as it needs shareholder approval for the adoption of the financial statements, without any adverse auditor remarks, for the year ended March 2021.