SEBI orders open offer for Prannoy Roy’s NDTV, says loan from VPCL violated takeover norms

The Securities and Exchange Board of India (SEBI) has ordered Delhi based Vishvapradhan Commercials Pvt Ltd (VCPL) to make an open offer for NDTV Ltd to acquire 52% stake in the Prannoy and Radhika Roy owned media house. According to reports, Vishvapradhan Commercials had indirectly acquired 52% shares in NDTV in 2009 through a convertible loan of Rs 350 crores sourced from a subsidiary of Reliance Industries Ltd.

SEBI has reportedly given VCPL 45 days time to make the open offer. In the order, SEBI has also directed VCPL to pay shareholders of NDTV an interest of 10% over the offer price of the shares they were holding when the stakes were acquired. The financial regulator has also observed that VCPL violated the takeover norms while acquiring the shares.

The SEBI order has observed that the firm VCPL had a revenue of only Rs 60,000 in 2017 and had Rs 400 crores in loans and advancements. It also included that VCPL had stated in a March 2016 letter that the source of the loan was the borrowed amount from Reliance Strategic Investment Ltd, a wholly owned subsidiary of RIL.

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SEBI has also reportedly issued a show cause notice to the promoters of NDTV, Prannoy and Radhika Roy for non-disclosure of the loan from VCPL.

The Delhi based firm Vishvapradhan Commercial Pvt Ltd was owned by Reliance Industries Limited. However, after RIL brought Infotel Broadband in 2010 form the Nahara group to venture into telecom, the ownership of VCPL was reportedly transferred to Nahara Group.

SEBI has noted that the financial statements provided by VCPL question its motive in the financial dealings with the promoters of NDTV because the firm did not have any history of advancing such loans. The order states “The elaborate mechanism adopted by the noticee (VCPL) and its associates appear to be solely to deflect attention from this acquisition and thus covetously overcome the obligations imposed by the Takeover Regulations,”

SEBI has pointed out that the promoters of NDTV took a loan of Rs 540 crores from Indiabulls through an open offer in 2008. To repay this loan they reportedly took another Rs 370 crore loan from ICICI bank and repaid that after taking a 350 crores loan from VCPL. Noting the loan agreement, SEBI has stated that it was an unsecured loan without any interest payments.

The regulator has observed that the financial agreement with NDTV was not meant for securing the loan but to take control of NDTV and leaving out just control of editorial policies to the promoters, right from the first day of execution. They have noted that it was basically a takeover act shrouded as a loan agreement and the intention behind it was VCPL taking control over NDTV without considering any modes of repayment from the promoters of NDTV.

Prannoy Roy and Radhika Roy owned NDTV is already under probe for alleged financial and tax irregularities by the IT department and ED. The CBI had last year raided the residence of Prannoy and Radhika Roy for an alleged bank loan fraud case.

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