Paradise Papers: Promoter firms pledge Zee shares to raise funds via offshore route

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”.

Written by Jay Mazoomdaar | New Delhi | Updated: November 7, 2017 5:27 am
Paradise Papers Subhash Chandra, Zee Entertainment, Paradise Papers ZEE, Paradise Papers, Indian Express Paradise Papers, ICIJ, Panama Papers, Offshore accounts, corruption, black money 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. (File)

Through a complex web of transactions, offshore companies of the Essel Group, promoted by Subhash Chandra, raised funds to repay debt and finance Veria Lifestyles, a venture he owns outside the Zee umbrella, by pledging promoter shares of Zee Entertainment Enterprises Limited (ZEEL), Appleby records show.

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.

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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.

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

In March 2010, EHL had acquired 21 million shares (then 4.85% of the paid up capital) in ZEEL from Delgrada Limited, a promoter company registered in Mauritius in 2000, for “nil consideration.” Delgrada is now Essel Media Ventures Limited. The same month, Deutsche Bank AG, Hong Kong Branch, gave a $55-million loan to EHL “secured by the company’s investment in ZEEL” and “repayable on 26 March 2013”.

Consider the financing of Veria. In 2002, it was launched in the US as a lifestyle TV channel and was, subsequently, repackaged as a “wellness” group comprising a TV network, an e-commerce web portal and retail outlets. Appleby records show that in 2010, the firm facilitated a $100-million loan from Credit Suisse AG, Singapore, for Borth Company Limited in British Virgin Islands. This loan was guaranteed by Delgrada for Borth to buy bonds of NatWell Synergies Investments Limited (BVI), the holding company for the Veria businesses.

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Borth had the option to sell these bonds to Asia Today Limited (Mauritius) which operated from Hong Kong as a joint venture between Chandra and Star TV since the early 1990s and was wholly owned by ZEEL in 1999. Appleby also got Credit Suisse to extend a $100-million Letter of Credit facility to Asia Today “to guarantee the obligations of the Borth Company Limited.” This LC facility was guaranteed by ZEEL.

To refinance the $100-million loan to Borth, guarantor Delgrada took a $102.83-million loan on February 23, 2011. This loan was guaranteed by Erith International Limited, the holding company of Delgrada, and, later, by Winshire Holdings (Mauritius) Limited when it acquired 100% equity of Delgrada from Erith, and in the process Delgrada’s 10.73% equity in ZEEL, in April 2012.

Soon after the Essel Group companies, wholly owned by Subhash Chandra, arranged loans worth US$ 155 million, according to Appleby records, Veria International Limited was set up in Bermuda in October 2010 with NatWell Synergies Investment Limited (BVI) as its shareholder.

“Veria is a privately held company and has seen strategic investments of over US$200 million. I see it as a US$2 billion business in five years,” Chandra was quoted by Knowledge@Wharton in September 2009. Veria Living network renamed itself Z Living in October 2014.

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At the centre of the wellness business, show Appleby records, NatWell Synergies Investment Limited (BVI) was also the sole shareholder of Natural Wellness Holding Corporation Limited (Bermuda) which, in turn, owned Natural Wellness Corporation Limited (Bermuda) and Wellness Bermuda Corporation Limited (Bermuda).

This structure, confirm records submitted to the County of Sullivan Industrial Development Agency in New York State, was in place till August 2015 and also covered two companies Natural Wellness UK Limited and Veria Lifestyle INC (USA) set up in 2007 and 2013 respectively. Subsequently, according to a Bermuda court notice on November 23, 2015, Natural Wellness Holding Corporation Limited (Bermuda) and Natural Wellness Holding Limited (Bermuda) merged with NatWell Synergies Limited (BVI). Wellness Bermuda Corporation Limited also merged with another BVI company Wellness Investment Holdings Limited which held stake in Veria International Limited since October 2011.

In 2014, Appleby noted that, following an increase in share capital, nine shares of Veria International Limited were issued at $1 per share with a premium of $10 million per share to Pan India Network Infravest Private Limited where Subhash Chandra owned 74.65% and his wife Sushila Goenka owned 25.35%.

RESPONSE from SUBHASH CHANDRA’S OFFICE

The Indian Express sent an email to Chandra listing the loans specified above. Asked if ZEEL disclosed the pledging of promoter shares to shareholders and regulators, Subhash Chandra’s office said in an emailed response: “We would like to mention that Dr Chandra is not an executive director nor holds any post in ZEE except for being a non executive Chairman. We would confirm that the companies (Delgrada and EHL) are Essel Group companies. We also confirm that all activities in these companies satisfy/comply with all regulatory aspects in their respective jurisdictions including India.”

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