Make open offer for NDTV within 45 days, SEBI tells VCPL

The Securities and Exchange Board of India (SEBI) on June 26 issued an order against Vishvapradhan Commercial Pvt Ltd (VCPL) in the case related to its acquisition of NDTV‘s shares. In a 28-page order, the market regulator has directed VCPL to make an open offer to acquire shares of NDTV Ltd within 45 days.

The order was issued because VCPL had indirectly acquired a 52 per cent controlling stake in the television company in 2009, while violating the regulator’s takeover norms.

In its order, SEBI has asked Vishvapradhan to make a public announcement to acquire NDTV‘s shares, in addition to paying an interest of 10 per cent to the shareholders — along with the offer price — who were holding shares in NDTV when the stake was acquired.

The market regulator, in its order, also stated: “the transaction is not to secure the loan but to acquire control over all the affairs of the Target Company [NDTV] leaving only the right to control the “editorial policies of NDTV” to the Promoters and Borrowers, right from the day of execution of the loan agreement.”

SEBI’s whole-time member, G Mahalingam also wrote: “Thus in my view, the takeover exercise has been conveniently couched as a loan agreement with the predominant intention of the Noticee [VCPL] being to acquire control over NDTV without contemplating any repayment of the loan, whatsoever, from the Promoters or Borrowers.”

According to Indian Express, the market regulator has also issued a show cause notice to the promoters — Prannoy Roy, Radhika Roy and RRPR Holding Pvt Ltd — for non-disclosure of loan agreement with VCPL to the stock exchanges.

In January 2015, Newslaundry broke the story on how  Reliance has bailed out NDTV‘s holding company,  Radhika Roy Prannoy Roy Private Limited (RRPR). In 2009, Reliance Ventures Limited, a fully-owned subsidiary of Reliance Industries Limited (RIL), extended an unsecured loan of Rs 403.85 crore to Shinano Retail Private Limited, which is effectively fully owned by Reliance Industrial Investments and Holdings Limited (RIIHL). RIIHL is part of RIL. In the same financial year, Shinano Retail Private Limited extended a loan of exactly the same amount to VCPL, which then extended the loan to RRPR.

In 2012, Reliance’s ties with RRPR were snipped with the entry of a third company, Eminent, owned by Mahendra Nahata – a board member of Reliance Jio. Eminent secured the ownership of Vishawapradhan Commercial’s Rs 403.85 crore loan to RRPR for Rs 50 crore. In effect, Eminent can acquire controlling stakes in NDTV any time it wants.

It is because of these circuitous dealings that, Sanjay Dutt — a former financial consultant with NDTV and Director of stockbroking firm Quantum Securities — asked the Central Bureau of Investigation to “investigate who is the true owner of” NDTV. The CBI registered a case against Prannoy Roy and Radhika Roy, and conducted raids at their home last year on the basis of this complaint.

Update: Following SEBI’s order, NDTV  issued a statement. It states: “At no point has control of NDTV’s editorial policies or its business plans been directly or indirectly yielded to a third party. No shares have ever been transferred by the promoters to anyone else. VCPL, the company that gave the loan to the promoters, has never been represented by even one director on NDTV’s board. NDTV has never ceded even an iota of editorial rights to anyone outside the company. The promoters reserve the right to contest any finding or verdict that suggests otherwise.”