NDTV To Challenge SEBI Ban Barring It From Accessing Capital Markets, Calls Order ‘Highly Unusual’ And ‘Perverse Direction’

New Delhi Television Ltd’s (NDTV) promoters Prannoy Roy and his wife Radhika Roy plan to challenge the recent Securities & Exchange Board of India (SEBI) barring them and their holding company RRPR Holdings Pvt Ltd from accessing the capital market for two years.

The recent SEBI order has also barred the Roys from holding a board or key managerial position at any other listed company for one year. Their existing holdings, including mutual fund units, would remain frozen during the prohibition period, as per the SEBI order.

Responding to the SEBI order, NDTV’s promoters issued a statement to the stock exchanges that they believe that SEBI’s order is based on an “inaccurate assessment” and is a “highly unusual and perverse direction” against which they will be take “legal action”.

Earlier, SEBI had accused the Roys and their holding company RRPR Holdings Pvt Ltd of keeping minority shareholders in the dark about three loan agreements in violation of listing agreements.

According to the SEBI, one of these loan agreements was with ICICI Bank while the other two agreements were with a company called Vishvapradhan Commercial Private Ltd (VCPL).

In 2018, SEBI had ordered VCPL to make an open offer for NDTV Ltd for indirectly acquiring control of up to 52% stake through a convertible loan of Rs 350 crore in 2009 ‘sourced’ from a subsidiary of Reliance Industries Ltd.

SEBI stated that its probe began after receipt of complaints in 2017 from Quantum Securities Pvt Ltd, a shareholder of New Delhi Television Ltd (NDTV), about alleged violation of rules by non-disclosure of material information to the shareholders about loan agreements with VCPL.

The ICICI Bank loan had a clause wherein the three promoters of NDTV had undertaken not to permit any major corporate restructuring or merger without prior written approval of the lender.

Yet, investigations found that another loan agreement was signed with VCPL for a loan of Rs 350 crore later, which did not carry any interest rate, to repay the ICICI Bank loan that had an interest rate of 19%.

An year later, a second loan agreement for Rs 53.85 crore was also signed with VCPL, which provided for the promoters of NDTV to allow the lender to indirectly acquire 30% stake in the media company through conversion of their warrants into equity shares of the holding company RRPR Holdings.

It has been alleged that by concealing such material information from public shareholders for a period when promoters were themselves dealing in the company’s shares, they had committed a fraud on minority public shareholders.

The SEBI noted that the company was bound to intimate such material information to its public shareholders to help them take informed investment decision.

The SEBI stated that, “The loan agreements were unmistakably structured as a scheme to defraud the investors by camouflaging the information about the adversarial terms and conditions impinging upon the interest of NDTV’s shareholders”.