The Enforcement Directorate has served a show cause notice on private broadcaster NDTV Limited, involving a sum of Rs.2,030 crore, for allegedly flouting foreign exchange regulations in availing of overseas and foreign direct investment facilities.
In a statement to the Bombay Stock Exchange, NDTV said the company, along with Prannoy Roy, executive co-chairperson; Radhika Roy, executive co-chairperson; K.V.L. Narayan Rao, executive vice-chairperson; and NDTV Studios Ltd. (erstwhile subsidiary of the company since merged with it) had on Thursday received the notice.
“The company has been advised that the allegations of the contraventions of provisions of the Foreign Exchange Management Act in the show cause notice are not legally tenable and the company will reply to the same within due course of time,” said the statement.
Alleging that the company received a total of over Rs.1,113 crore in violation of Foreign Exchange Management Act rules, the directorate has issued the notice on the basis of investigations into the financial transactions made by 21 companies.
Four of the companies were incorporated in the Netherlands, six in Mauritius and one each in the United Kingdom and Sweden. NDTV Limited was directly linked to 18 of the firms, while one was a joint venture and two were associates.
Funds through shares
According to the ED, the Foreign Investment Promotion Board (FIPB) had permitted the parent company, through its U.K. subsidiary NDTV Networks Plc (NNPLC), to raise funds from abroad by way of equity shares and through listing on the London Stock Exchange. The funds were to be channelised to the group companies in India.
Between March 2007 and October 2010, NDTV allegedly raised $170 million through NNPLC and brought in $163.78 million to the Indian group firms.
Based on Reserve Bank of India observations, the ED alleges that the money was raised through bonds, loans and fixed-income securities, in violation of FIPB conditions and Foreign Exchange Management Act rules.
Under the automatic route of the foreign direct investment, the Indian companies also allegedly received over $83 million from Mauritian subsidiaries NDTV World Mauritius Media and NDTV Worldwide, which, according to the RBI, violated foreign exchange rules.
