Essel Group has to be crystal clear about its intent, else it could run into the risk of severe brand erosion

When Essel Group Founder, Subhash Chandra, came out in the open and apologised to his shareholders after his flagship company, Zee Entertainment's and other group company's stocks tanked last month, industry stalwarts lauded him for owning up to his mistakes. In fact, Zee Entertainment's stock (which had dipped by 26 per cent) saw an overnight revival after Chandra's open letter to his shareholders and as heads of brand valuation companies considered Chandra's move as a great example of crisis mangement. Despite the upheaval in the stock market, the brand gurus didn't really forsee an erosion in the brand value of Zee Entertainment, where Chandra and his family plan to sell 50 per cent of their stake to settle their infrastructure debts.

However, the recent news of market regulator, Securities and Exchange Board of India summoning CEOs of four mutual fund companies to quiz them for punitive action consequent to the enforcement of securities by two lenders last week, has led brand valuation and communications experts to believe that such outrage could tarnish Essel Group and Zee Entertainment's brand value.

This means that the statements issued by Chandra that he had reached an agreement with the lenders could be either fradulent or misleading. "Apologies become empty words unless it is not accompanied by some clear course correction action points. The stakeholders want to see a proactive role and a broader view of responsibility from the leadership team taking ownership and bringing in certainity, reassurance and confidence," says Communication Specialist, Anup Sharma.

Chandra has publicly said that he has signed a legal document promising to pay back his lenders by September, and by then the stake sale in his flagship company would be completed. His son, Punit Goenka, MD of Zee Entertainment, has also assured investors that the talks for the strategic sale has been progressing well and that they would be able to complete it well within the deadline.

Also Read: ED says no objection to restoration of Mallya's properties to banks

At a time when there is public outcry and outrage, brand experts feel that the Essel Group promoters have to be constantly in touch with their shareholders and lenders  and convince them that there are changes that are already happening. "They have to show tangibly that they are making amends, else, they wont be forgiven," says Raghu Vishwanath, MD of brand valuation company, Vertebrand.

"Essel Group, especially Zee Entertainment, has always been a responsive brand, but in a time like this, they have to be even more responsive, else they will give the market an opportunity to create stories that could lead to erosion of brand value. They have to be crystal clear about their intentions," adds the MD of a leading brand valuation company.

Will the current outcry impact Zee's brand valuation and its stake sale? Will it be able to command the kind of premium which it otherwise could have? Though the Zee management claims that the crisis has not had an impact in its discussions so far, industry experts and heads of brand valuation companies expect an impact.

"They will be able to raise money on the back of their strong brand equity, but the crisis will make it difficult. They may not be able to raise as much money as they would have liked to," says Vishwanath of Vertebrand.

"They will get a buyer, but the buyer will pay lesser. Before the stock market chaos, Subhash was quite inflexible, and rightly so because Zee Entertainment has been in the best of health, it has practically zero debt and has a strong subscription revenue. But now he has to settle down for what he gets," points out a senior media analyst.

There have been numerous names of potential buyers floating around such as Tencent and Comcast. "Tencent is a Chinese company and the regulations don't allow a Chinese company to pick up stake in an Indian media business. Comcast has a mountain of debts and I dont think they would be in the fray," dismisses this analyst.

Who will pick up a stake in Zee Entertainment? A marriage of a strategic partner and a financial institution is more likely, say media experts.