Is ‘Indirect Control’ Over NDTV Payback for Speaking Against Govt?

As per SEBI, Vishvapradhan, a subsidiary of Reliance, has a 52% stake in NDTV, giving it ‘indirect control’.

(Photo: The Quint)

Video Editor: Vivek Gupta and Purnedu Pritam

On 27 June and there was a serious buzz in the Bombay Stock Exchange. The excitement among investors was so huge that shares of NDTV surged by 20%.

The reason for this buzz was a SEBI order.

Vishvapradhan, a subsidiary of Reliance, issued loans to NDTV in 2009. SEBI considered these transactions Vishvapradhan’s ‘indirect control’ over NDTV. SEBI said that the law was bypassed and an open offer wasn’t issued. Hence, an open offer should be put forward (retrospectively).

Right now, NDTV shares aren't worth much. If you consider the price of NDTV shares in 2009, they should be worth Rs 450 today. In 2009, their value was Rs 214 on which a 10% interest rate was imposed.

So when the SEBI order was issued, traders assumed that an open offer would soon be put forward. They probably calculated that shares are cheap right now, and hoped to make a profit by selling them at a higher price.

After talking to many experts, we arrived at a conclusion that this SEBI order may look strong, but ultimately, it is un-implementable. For one, how will you identify the 2009 shareholders?

In 2009, almost 40% of the shares were public. Out of them, how will you identify the 26% shares to be sold in open offer? Also, those who don’t own that share anymore may approach the court with a plea that they have been cheated as they didn’t receive this open offer, which was their legal right.

The new shareholders are the ones who will benefit and the older shareholders will protest. So new shareholders, old shareholders, Vishvapradhan and NDTV, all of them will approach the court in opposition to this SEBI order, and the order won’t be implemented.

Experts knew about this issue, but the general public didn’t. From SEBI’s order, we now that in 2009, Vishvapradhan loaned NDTV Rs 400 crore.

In return for this loan, as of today, Vishvapradhan has a 52% stake in NDTV. SEBI believes that Vishvapradhan has indirect control over NDTV now, and Vishvapradhan should come clean about whether or not they want to take over the company.

Both NDTV and Reliance have denied that Reliance has any editorial control over NDTV, and that there’s a Reliance representative on NDTV’s board of directors.

Vishvapradhan says that they have merely provided a loan to NDTV, and don't have any control. But SEBI has come to the conclusion that Vishvapradhan in fact has indirect control over NDTV.

Now, what is indirect control? There are many layers of control. What is the ownership pattern? Sometimes the shareholding of a certain percentage is not enough to have direct control.

Right now, the matter is unclear.

A new aspect under the law has been discovered, and Reliance will challenge this order in SEBI’s appellate tribunal. The issue may even go up to the Supreme Court.

Vishvapradhan will also challenge this order because if they are forced put forward an open offer, then Reliance will have to cough up Rs 700 crore, which is the difference between old and new rates.

Reliance will never do this. They'll try every legal avenue open to them.

Many experts have said that if SEBI wanted to ensure a stringent regulation of this order, then instead of passing it retrospectively, they could have imposed the fine on Reliance and asked them to deposit it in the Investor Protection Fund.

Reliance may have still issued a legal challenge, but at least this issue would have reached a conclusion.

Right now, this looks like a scene from a circus where a clown slaps another clown which makes a huge thud, but in reality, no one feels any impact.

Many people have also found the timing of this decision very interesting. Elections are approaching. Is the government trying to prove through a regulator that they don’t belong to anyone? Or maybe they want to send a message to NDTV who are very critical of the Centre?

In the bargain, they have hurt NDTV's credibility by raising the question of their non-disclosure of the loan they took from a Reliance subsidiary. The question for Reliance is how to tackle this issue. Should they take over the company, sell it to someone or let the things be as they are?

This issue raises a lot of questions on the nexus between media, rule of law, the regulator, business and politics. In coming days, we will see a lot of debate over this.

As far as this particular SEBI order is concerned, there's no clear solution in sight yet.