Sebi orders Delhi co to make open offer for NDTV

Markets regulator Sebi on Tuesday ordered Delhi-based Vishvapradhan Commercial (VCPL) to make an open offer for NDTV, which it failed to do after it indirectly acquired majority control of the media house in 2009.

VCPL had taken a majority stake after advancing a Rs 350-crore convertible loan to the promoters of NDTV. The money for the loan was sourced from Reliance Strategic Investment, a subsidiary of RIL, Sebi said in an investigation report. Sebi has ordered VCPL to make the open offer within 45 days.

Moreover, the company has been asked to pay interest at 10% from the date of the alleged violation.

Established in 2008, the ownership of VCPL had changed hands from RIL to Nahata group, from which Reliance had bought Infotel Broadband in 2010 to re-enter the telecom business, a PTI report said. RIL now runs its telecom business under the Reliance Jio brand.

The Sebi order follows an investigation that showed the terms of the 10-year loan advanced in 2009 from VCPL to NDTV’s promoters was “not a normal investment transaction”. In its order, Sebi said that various loan conditions — including a non-compete term — gave VCPL a 52% control over NDTV. VCPL, which was engaged mainly in wholesale trading, had a revenue of only Rs 60,000 in FY17. However, it had over Rs 400 crore of long-term loans and advances in its books. The regulator said that the company and its associates “had neither the history of advancing such loans nor do they appear to have had the financial wherewithal to advance loans on such liberal terms”.

Looking at the terms of the loan, including the fact that no interest was charged, Sebi said that “the elaborate mechanism adopted by 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”.