Sanjiv Goenka Opens Up on Failed Dharma Productions Acquisition Bid
Sanjiv Goenka, the founder and chairman of the RPSG Group, has publicly discussed the missed opportunity to acquire a stake in Karan Johar's Dharma Productions, attributing the breakdown to a critical legal clause that "spooked" the filmmaker. In a candid conversation on a podcast with Parthiv Neotia, Goenka revealed that the deal fell through due to over-delegation on his part, offering a hard lesson in business negotiations.
The Legal Clause That Derailed the Deal
Goenka explained that during negotiations, his legal team included a drag-and-tag clause in the agreement, which unexpectedly alarmed Karan Johar. "Karan is a very dear friend, he continues to be. I think our lawyer and legal team put a drag and tag clause and it spooked him. I wasn't aware these clauses were there and that it spooked him. If I had known, I would have removed them. That was the reason the deal eventually didn't happen," Goenka stated. He expressed disappointment over the outcome, emphasizing it as a cautionary tale about delegation. "I am disappointed that I didn't get the Dharma deal. Sometimes it is also a lesson in how much to delegate and at what time to delegate. Too much delegation doesn't necessarily work. This is one example," he added.
Understanding Drag-Along and Tag-Along Rights
In mergers and acquisitions, drag-along rights empower majority shareholders to compel minority shareholders to sell their stakes if a sale is agreed upon by the majority. Conversely, tag-along rights safeguard minority shareholders by allowing them to participate in a sale initiated by the majority, ensuring they receive equivalent terms and pricing. This clause, while standard in such deals, proved to be a sticking point in the sensitive negotiations with Johar.
Goenka's Perspective on Film and Content Business
When questioned about his ongoing interest in the film industry, Goenka highlighted that RPSG has already produced 26 movies under Yoodlee Films. He acknowledged recent challenges but remained optimistic about the sector. "It is a business that has not done as well in the last couple of years as it has in the past, but I do believe content and IP are two very important businesses. If you have content and if you own IP to that content, there will be more avenues for monetisation as technology progresses," he remarked, underscoring the strategic value of intellectual property in today's digital landscape.
Karan Johar's Decision to Partner with Adar Poonawalla
Following the failed talks with RPSG, Karan Johar eventually sold a 50% stake in Dharma Productions to Adar Poonawalla, CEO of the Serum Institute of India, in a landmark Rs 1,000 crore deal through Serene Productions in 2024. Johar retained the remaining 50% stake, with Apoorva Mehta continuing as CEO. Johar has previously elaborated on this decision, citing the need for expansion and funding. On Raj Shamani's podcast, he said, "In 2023, we realised we need to leverage and grow. In our business to grow organically would have taken me another 5-7 years. I needed the fund to grow and today, I am happy with my partnership with Adar."
Creative Control and Future Plans
Johar assured that the partnership with Poonawalla has not compromised creative autonomy. "We haven't lost any creative control. There are cheques and balances because when there's a partner, you become more accountable. We got an investment for expansion, I was able to immediately open a distribution arm and talks are going on to do something big with the music arm," he noted. He praised Poonawalla as a trusted advisor, with Apoorva Mehta playing a pivotal role in finalizing the agreement and ensuring non-interference in creative matters.
This episode highlights the intricate dynamics of high-stakes business deals in the entertainment industry, where personal relationships and legal intricacies can significantly influence outcomes.
