Market regulator Securities and Exchange Board of India (SEBI) has finally issued a show cause notice to initiate action for the failure of New Delhi Television Ltd (NDTV) to make a public announcement pursuant to the “change of control” following transfer of shares to Vishvapradhan Commercial Pvt Ltd. This comes at a time when NDTV, which is still run by Dr Prannoy and Radhika Roy, have issued a strong rebuttal to the Income Tax Appellate Tribunal (ITAT)’s judgment with regard to various tax related actions against it.
Incidentally, the Business Standard had earlier reported (, based on Court documents, a SEBI submission to the Delhi High Court on 15 December 2016 in a case relating to NDTV. While SEBI’s affidavit showed that the regulator considered the sale of shares by Prannoy and Radhika Roy (15.94% and 16.32%, respectively) as well as those of RRPR Holdings amounted to a change in control in favour of Vishwapradhan Commercial, no further action seems to have been taken.
In a letter from SEBI that has been reviewed by Moneylife, a SEBI manager says that the regulator has issued a show cause notice to Vishwapradhan on 20 December 2016.  The letter says, “…it may be noted that the proceedings against Vishvapradhan under Sections 11(1), 11(4) and 11B of the SEBI Act, and regulations 44 and 45 of the SAST Regulations read with corresponding provisions of Regulations 32 and 35 of SEBI (Substantial Acquisition of Shares and Takeover) Regulations have been initiated for failure to make public announcement pursuant to change in control in NDTV as required under Regulation 12 read with Regulation 14 of SAST Regulations for which the Show Cause Notice was issued on 20 December 2016″.
It seems rather strange that SEBI has taken no action on its show cause notice issued in December, since the BSE records as of June 2017 still show the substantial holding of NDTV as follows: Prannoy Roy 15.94%, Radhika Roy 16.32% and RRPR Holdings ltd 29.18%. And yet, the multiple changes in the NDTV holdings have been the subject of court cases and innumerable news reports and are once again in focus after the ruling by the ITAT.
In July 2009, Vishvapradhan gave an interest free loan of Rs350 crore to NDTV’s Dr Roy, his wife Radhika Roy and their private holding company RRPR Holding, which was a bailout-cum-takeover in the guise of a loan. Under the agreement signed on 21 July 2009, the Roys were to issue a convertible warrant that equals to 99.9% of the “fully diluted equity share capital of the borrowers (the Roys and RRPR Holdings) at the time of conversion” immediately upon execution of the agreement.
As per the agreement, the Roys and RRPR Holding were to use the loan amount to repay in full a loan availed from ICICI Bank in October 2008. Vishvapradhan also had the right to buy from the borrowers all equity shares at par hold by them in NDTV. However, Vishvapradhan and its affiliate agreed not to purchase any more shares of NDTV to increase their stake for more than 26% without consent from other parties.
“The amount of Rs350 crore recorded in the loan agreement is exactly 26% of the valuation of NDTV (at Rs1,346 crore),” says a notice from the Income Tax (I-T) Department issued on 29 January 2016.
But the intrigue does not end with this. A court affidavit of the DG Investigation of the Income Tax (document reviewed by Moneylife) says in 2015 that VCPL “has no business activity and is not a genuine concern.
The I-T notice says, “The loan is contingent upon completion of due diligence of investment of $85 million by NDTV Four Holdings Ltd, Mauritius in NDTV Studios Pvt Ltd and further upon the ability of RRPR to transfer to NDTV and utilise $85 million either by merger of NDTV Studios Pvt Ltd with NDTV or by any other method. …it is evident that the agreement although titled as loan agreement is actually sale agreement for transfer of controlling rights over NDTV by RRPR to Vishvapradhan for a consideration of Rs403.85 crore.”
As per a regulatory filing, as on June 2017, Dr Roy holds 15.94%, Ms Roy owns 16.32% and RRPR Holding holds 29.18% stake in NDTV making the promoter group as largest stakeholder with 61.45% stake in the company. This as well documents (seen by Moneylife) and issued by the market regulator and I-T Department and the loan agreement, shows that it is Vishvapradhan and not the Roys that controls NDTV.
According to the December 2016 report from the Business Standard  two companies Subhgami Trading and Viswamukh Trading, that hold 50% stake each in Vishwapradhan, shared the same address at Shreeram Mills office in Mumbai. “On 29 August 2009, Subhgami and Vishvamukh sold their shares to Shinano Retail and Teesta Retail, based in Dhobi Talao, Mumbai. After changing hands a couple of times, the ownership of Vishvapradhan is now with a Gurgaon-based company called Nextwave Televentures. Vishvapradhan and Nextwave shared a common mail ID,” the report says.
We sent emails to Dr Roy and Ms Roy. We will upload their responses, if any, as and when we receive it.