Look at Network 18 takeover again: SAT to SEBI

Mumbai, April 14:  

The Securities Appellate Tribunal has directed securities market regulator SEBI to reinvestigate whether Reliance Industries got control of media group Network 18 without following the procedure

prescribed by under the Takeover Regulations of 2011.

The tribunal has raised concerns over an agreement in 2012 between Independent Media Trust (IMT) — of which Mukesh Ambani-led Reliance Industries (RIL) is the sole beneficiary — and six holding companies of Raghav Bahl and the Bahl Group, who together owned 51 per cent stake of Network 18.

Under the terms of the deal, by converting ZOCDs issued to it, IMT would gain control over Network 18 (see box).

The tribunal stated that SEBI has failed to give reasons as to why various clauses contained in the ZOCD agreement do not amount to divesting control over the target company from the Bahl Group to the RIL-backed Trust.

“We, in public interest, direct SEBI to reinvestigate the question as to whether the respondent no. 2 (Independent Media Trust) in the guise of executing ZOCD agreement, indirectly acquired control over the target company (Network 18) without following the procedure prescribed under the Takeover Regulations and if so, take appropriate action,” SAT ruled. SEBI has been given six months to complete the investigation.

The case was brought before the SAT by two minority shareholders — Victor and Sangeeta Fernandes — stating that the open offer price of ₹41.04 per share, approved by SEBI, was not correct as it did not reflect the economic interest of the acquirer. The highest negotiated price (open offer price) should have been ₹5,68,430.32 per share, the appeal added.

While the SAT dismissed the plea on the offer price, it asked SEBI to look into whether the Trust had gained control over Network 18 as early as 2012 since the option for conversion of ZOCDs into equity shares could be exercised by the Trust at any time.