Markets regulator Sebi on Tuesday imposed a penalty of ₹5 crore on NDTV for its failure to disclose price-sensitive information about VCPL loan agreements but the company denied the charges and said it will appeal against the ruling.
The loan agreements had clauses and conditions that substantially affected the functioning of the media company, Sebi said in its order.
The regulator said its probe began after receipt of complaints in 2017 from Quantum Securities Pvt Ltd about an alleged violation of rules by non-disclosure of material information to the shareholders about loan agreements with Vishvapradhan Commercial Private Ltd (VCPL).
As per Sebi, a loan amount of ₹350 crore was borrowed by the promoters of NDTV under the VCPL loan agreement in 2009 to repay earlier loan availed from ICICI Bank and a second loan agreement with VCPL was signed for ₹53.85 crore a year later.
Further, one of the terms of loan agreements allowed VCPL to indirectly acquire 30% shareholding of NDTV through the conversion of warrants into equity shares of RRPR Holding.
These clearly establish that 30% shareholding of NDTV was put at the absolute disposal of VCPL by virtue of the loan agreements, the regulator said.
In a regulatory filing, NDTV said it has stated on several occasions, including in disclosures to the exchanges, “that journalists Radhika and Prannoy Roy, who are its founders and promoters, continue to hold majority stake with 61.45% of the paid up share capital of the company”.
There has been no change in control through any arrangements or transactions with third parties and that any report or allegation to the contrary is baseless, it noted.
The company “will appeal urgently” against the Sebi order imposing a fine of ₹5 crore for alleged non-disclosure of the loan agreements entered into in
2009-2010 by the founders with VCPL, as per the regulatory filing.
“NDTV was not a party to this arrangement and it disclosed these agreements in 2015 in response to media reports that speculated change in control. The core issue of the alleged surrender of control to VCPL is pending adjudication at the Securities Appellate Tribunal, which, in 2019, granted a stay in favour of the founders of NDTV, which is still in operation,” the filing said.
“The company has been advised by its lawyers that the Sebi order is inter alia based on an inaccurate assessment of facts and will not withstand scrutiny in appeal,” it added.
In the 37-page order, Sebi said the VCPL loan agreements were inherently material and price-sensitive in nature and therefore they are required to be disclosed to the stock exchanges for dissemination to the public so that public shareholders and prospective shareholders could have taken an informed decision.
The regulator noted that NDTV was aware of such loan agreements with effect from August 5, 2015, which is the date of its board meeting, in which agenda of updating the board about regarding “change of control” issue flowing from VCPL agreements were put forth by promoters.
However, the media firm did not make a disclosure about the loan agreements to the stock exchanges and violated the provision of listing agreement, Sebi said.
Last week, the regulator imposed a total penalty of ₹27 crore on NDTV
promoters for violating various securities norms by concealing information from
shareholders regarding certain loan agreements. Soon after that order, the
company had said it would appeal against it.