Sans Governance, ESG is a Lame Duck

The recent events surrounding Paytm and Zee Entertainment serve as a chilling reminder of the critical importance of good governance, particularly the ‘G’ in ESG principles. Investors in One 97 Communications, Paytm’s parent company, witnessed a staggering ₹20,000 crore vanish within three trading sessions after the Reserve Bank of India (RBI) raised concerns about ‘material supervisory concerns’ and ordered the closure of Paytm Payments Bank. Similarly, Zee Entertainment shareholders saw their wealth erode by ₹7,000 crore in a single day following the collapse of the Zee-Sony merger deal, fuelled by unease around potential financial irregularities. [EasyDNNnews:PaidContentStart]

While the specifics of each case differ, the underlying message is clear: ignoring good governance erodes trust, destroys value, and ultimately cripples businesses. In Paytm’s case, the pursuit of rapid growth seems to have overshadowed concerns about governance even after its IPO. In Zee Entertainment’s case, allegations of potential fund diversion of up to ₹1,000 crore are under investigation by the Securities and Exchange Board of India (SEBI). This erosion of trust has far-reaching consequences. Investors, especially those adhering to ESG principles, increasingly prioritise good governance due to its direct link to long-term value creation. 

Strong governance fosters confidence, attracts capital, mitigates risks, and ultimately leads to sustainable growth. Conversely, governance lapses like those witnessed in the above cases not only inflict immediate financial losses on investors, but also create a ripple effect, damaging investor sentiment towards the entire Indian market. Moving forward, decisive action is crucial. Regulatory bodies like the RBI and SEBI must strengthen enforcement mechanisms and encourage independent directors to play a more proactive role in holding companies accountable. 

Companies themselves must prioritise transparency by proactively addressing shareholder concerns and adopting robust governance frameworks. At DSIJ, we remain committed to a rigorous research process that filters out companies where we identify or suspect governance issues. We have consistently strived to protect our readers by avoiding recommendations for such companies. The recent debacles surrounding Paytm and Zee Entertainment serve as a stark reminder that good governance is not a luxury, but a cornerstone of trust, value creation and sustainable growth. 

Ignoring this principle comes at a heavy price, borne not just by the companies but also by individual investors, especially voiceless minority shareholders who deserve better. We must collectively strive for a future where strong governance is not just an aspiration but a reality, safeguarding the interests of all stakeholders and ensuring the Indian market flourishes with integrity and trust. This issue of our magazine dives deep into critical topics shaping the investment landscape. We analyse the rollercoaster ride of Paytm since its listing, exploring the impact of recent regulatory actions and offering guidance for investors navigating these uncertainties. 

Additionally, we delve into the potential ripple effects of China’s economic and equity market volatility on the Indian scene, providing valuable insights for informed decision-making. 

Our cover story takes you through a sector-by-sector analysis of India Inc.’s December quarter results. We offer a comprehensive overview, leveraging the data from major players who have already reported their results. This allows us to draw meaningful conclusions about the overall trends, such as the encouraging signs of improved operational efficiency, with operating and net profit growth exceeding top-line growth. We encourage you to explore these insightful articles and share your valuable feedback and suggestions.

RAJESH V PADODE
Managing Director & Editor

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