In a big blow to controversial media network NDTV, India’s capital market regulator Securities and Exchange Board of India (SEBI) has found its promoters Prannoy Roy and Radhika Roy guilty of making undue gain from insider trading. As a penalty for the financial crime, SEBI has barred them from trading in the securities market for two years, and directed them to return the illegal gain of Rs 16.97 crore they had made from the insider trading more than 12 years ago.
Apart from Pranoy Roy and Radhika Roy, former NDTV CEO Vikramaditya Chandra, senior advisor Ishwari Prasad Bajpai, group CFO Saurav Banerjee also have been found guilty of insider trading.
According to an investigation conducted by SEBI, Pranoy Roy and his wife Radhika Roy have violated the Prohibition of Insider Trading (PIT) Regulations. They are accused of possessing Unpublished Price Sensitive Information (UPSI) during 2007-2008 relating to discussion on reorganisation of New Delhi Television Ltd.
The discussion pertained to the restructuring of NDTV into news-related businesses and investments beyond the news business in the year 2008. According to SEBI, the promoters of the company had traded shares of the company while in possession of price-sensitive and unpublished information related to restructuring of NDTV.
The investigation pertained to a period of almost two years, divided in two parts, the period from 31 July 2016 to 7 September 2007 was Price Sensitive Information (PSI) period, while from 7 September 2007 to 16 April 2008 was Unpublished Price Sensitive Information (UPSI). During PSI, price sensitive information is disclosed to stock exchanges, while during UPSI it is not disclosed.
The UPSI period was from 7 September 2007 to 16 April 2008, and the Roys had sold shares of the company on 17th April 2008, making a profit of Rs 16,97,38,335. This was violation of PIT Regulations, as people holding UPSI are prohibited from trading in shares before the expiry of 24 hours from disclosing the information to stock exchanges. They had also bought shares on December 26, 2007, during the UPSI period.
They had bought 48,35,850 NDTV shares on December 26, 2007 at the rate of ₹400per share. On April 17, 2008, they sold 49,13,676 shares at the rate of ₹435.10per share. Therefore, they made a gain of ₹16,97,38,335 on the 48,35,850 shares bought during the UPSI period.
This was not only violation of PIT regulations, but also a violation of NDTV’s own ‘Code of conduct for Prevention of Insider Trading’. As per the clause 3.2.2 and clause3.2.4 of the Model Code specified in the Schedule I of the PIT Regulations, 1992, when trading window is closed, employees/ directors shall not trade in company’s shares and the trading window shall be opened 24 hours after the UPSI was made public.
As NDTV had disclosed the information about the discussion on restructuring on 16 April 2008, the trading window was closed up to 17 April. But Pranoy Roy and Radhika Roy sold shares during this closed window period, thereby the gain of Rs ₹16.97 crore they made is considered illegal as law.
Now they will have to disgorge the gain amount, either jointly or individually, along with 6% interest per annum.
Other than Pranoy Roy and Radhika Roy, several other officials are also found guilty of insider trading by SEBI. They are, Mr. Vikramaditya Chandra, Group Chief Executive Officer & Executive Director at that time, Mr. Ishwari Prasad Bajpai, Senior Advisor, Editorial and Projects and Mr. Saurav Banerjee, Director Finance & Group Chief Financial Officer. Although they didn’t purchase any NDTV shares during the probe period, there were issued ESOPs during the period when they were holding PSI and UPSI. All three had sold shares during these periods, making them guilty of insider trading.
SEBI has found that Vikramaditya Chandra made an illegal gain of ₹ 6,67,385, Ishwari Prasad Bajpai gained ₹ 882,780, and Saurav Banerjee lost ₹47,000 from selling shares during the restricted period.
Accordingly, Chandra and Bajpai have been asked to disgorge the illegal gain amount along with 6% interest. Along with that, all three has been barred from trading in the securities market for a period of one year.
In the third order issued by SEBI, NDTV advisor Sanjay Dutt, his wife Prenita Dutt, and three entities linked to him have also been found guilty. The three firms are, Quantum Securities Private Limited, SAL Real Estate Private Limited and Taj Capital Partners Private Limited. Both the Dutts and the three companies have NDTV shares, and they also had traded in the shares during the restricted period. They also have been ordered to disgorge the illegal gain amount totally ₹2.2 crore, and they have been barred from the capital markets for 2 years.