On 26 June, the Securities Exchange Board of India (SEBI) ordered Vishvapradhan Commercial Pvt Ltd (VCPL) to make a public offer for acquiring shares of NDTV. In 2009, VCPL had indirectly assumed a controlling stake in the media company, by giving a loan of Rs 350 crore to its promoters Radhika Roy and Prannoy Roy Holdings Pvt Limited, effectively acquiring 52 percent of NDTV. SEBI stated that this was done in violation of their takeover norms. SEBI noted that the takeover exercise “has been conveniently couched as a loan agreement.” It further directed VCPL to pay 10 percent interest on top of a takeover fee to the former shareholders of the company.
In his December 2015 cover story, Krishn Kaushik detailed the financial troubles of the NDTV network. The following extract from the story covers in detail the cycle of loans and the murky finances that have haunted the network since 2008. The trail of bad loans started with an initial loan to from IndiaBulls Finance, and led to the VCPL’s loan of 350 crore. From there, the trail only got murkier, raising serious questions about Radhika and Prannoy Roy’s hold over their channel. “VCPL’s transactions are key to the question of who owns and controls NDTV,” Kaushik wrote.
Throughout NDTV’s existence, the Roys have exerted complete control over the network’s editorial vision and its business strategy. But a chain of transactions, beginning in 2007, which is mentioned in the recent Delhi High Court affidavits, suggest that their influence may have waned considerably.
That year, Radhika and Prannoy Roy decided to buy back a 7.73-percent stake held by another shareholding entity, GA Global Investments. Promoters may have different reasons for buying back shares, such as if they anticipate that their price will rise, or want to further consolidate their holding in the company. Often, as it was in this case, the deal is struck at a price higher than the market rate—NDTV’s stock was hovering at around Rs 400 at the time, but the Roys bought shares back at Rs 439.
As per Indian stock market regulations, this triggered an “open offer,” which allows other shareholders to sell stake—up to a prescribed limit—to the promoters at the same price. These regulations are meant to ensure that when a large shareholder strengthens her ownership, minority shareholders are given the option to exit if they feel their investment will be affected.