Penalty of Rs. 5 crore imposed on NDTV by SEBI over Disclosure Lapses

Penalty of Rs. 5 crore imposed on NDTV by SEBI over Disclosure Lapses

The Security and Exchange Board of India (SEBI) imposed a penalty on New Delhi Television Limited (NDTV) of Rs 5 Crores for its failure to disclose price-sensitive information about the Vishvapradhan Commercial Private Ltd. (VCPL) loan agreements

On 26 August 2017, the markets regulator SEBI received a complaint from Quantum Securities regarding a loan agreement signed between promoters of NDTV i.e. Prannoy Roy, Radhika Roy, and RRPR Holding Pvt. Ltd. (RRPR Holdings), and Vishvapradhan Commercial Private Ltd. (VCPL).

The dispute started in 2017, after receipt of complaints from Quantum Securities Pvt. Ltd. who alleged violation of rules by non-disclosure of material information to the shareholders about loan agreements with the VCPL.

In 2009, the loan amount of Rs.350 Crores was borrowed by the promoters of NDTV under the VCPL loan agreement to repay the previous loan availed from ICICI Bank, and a second loan agreement with VCPL was signed for Rs 53.85 Crores a year later.

According to one of the terms of loan agreements, the VCPL was permitted to indirectly acquire 30% shareholding of NDTV through the conversion of warrants into equity shares of RRPR Holding.

SEBI said that these clearly establish that 30% shareholding of NDTV was put at the absolute disposal of VCPL by virtue of the loan agreements.

SEBI added that the loan agreements allegedly contained various clauses that had a binding effect on NDTV, in such a manner that it could adversely affect the interest of its public shareholders.

According to the SEBI order, the VCPL loan agreements were inherently material and price sensitive and had to be disclosed to the stock exchanges for dissemination to the public in order to allow the public shareholders and prospective investors to take an informed decision.

The SEBI further said, "Depriving the public shareholders and prospective investors from such crucial and price-sensitive information is not only bad in law but also seriously affects the transparency in the securities market."

According to SEBI, NDTV knew about the loan agreements since August 2015 during its Board meeting where the "change of control" issue from VCPL agreements was put forth by the Promoters. However, NDTV suppressed the facts and did not make the disclosures about the loan agreements to the stock exchanges, thereby violating the provisions of the listing agreement.

The company denied all the allegations against it and said that it will appeal against the ruling of the SEBI.