The Securities and Exchange Board of India (SEBI) has finally initiated
approved enforcement action against New Delhi Television Ltd (NDTV) and
its promoters Prannoy Roy and Radhika Roy and RRPR Holdings Pvt Ltd,
for the company's failure to multiple disclosure information to
Exchanges.
In a notice issued on 8 June 2016, the market regulator said,
"...(SEBI) conducted an examination of certain non-compliance by you in
the matter of NDTV Ltd and prima facie found that you have violated SEBI
Act, 1992 and SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997 (Takeover Regulations). In view of this, SEBI has
decided to initiate/ launch adjudication proceedings against you under
section 15A (b) of the SEBI Act for the alleged violation."
However, sources tracking the issue point out that this covers only a
few issues in a voluminous body of data and facts available with the
regulator; it is not clear at the moment whether this is merely SEBI's
initial action or the only issues that it plans to examine at length.
Replying to the SEBI notice, NDTV has taken the stand that the
violations in the notice are merely procedural. Its communication to the
stock exchanges says, "The Company is of the opinion that the alleged
non-compliance referred in the show cause notice (SCN) are
technical/procedural in nature. The Company and its Promoters are in the
process of seeking legal advice to take appropriate action in the said
matter."
The SEBI examination into alleged violations against NDTV, its
promoters and major shareholders found non-compliance in certain deals
like when General Atlantic sold 7.73% of its stake in the company to Mr
Roy and Mrs Roy on 26 December 2007. Following this transaction, NDTV
promoters made an open offer. However, they did not comply with the
Takeover Regulations for the same transaction on National Stock Exchange
(NSE). The due date for disclosure of the General Atlantic share sale
was 28 December 2007. The information appeared on BSE, but there was no
information disclosed on NSE. On 14 January 2016, NDTV via an email
informed NSE about the transaction, the findings from SEBI says.
Similarly, when Indiabulls Financial Services Ltd bought 6.40% stake in
NDTV on 1 January 2008, the information was not disclosed to the
exchanges for over seven years, SEBI found out. This information was
shared by NDTV to BSE on 3 July 2015 and to NSE on 14 January 2016.
SEBI says NDTV and its promoters also failed to disclose the
information about promoters' stake sale to Goldman Sachs Investment
(Mauritius) Ltd on 17 April 2008, to GS Mace Holding Holdings Ltd with
Goldman Sachs Investment (Mauritius) Ltd as PAC on 14 July 2008. This
stake was sold by both the Roys and RRPR Holdings Pvt Ltd. Only the deal
with Goldman Sachs Investment (Mauritius) Ltd on 17 April 2008 was
disclosed by the company, the SEBI notice says.
Following the open offer, NDTV promoters bought 20.28% stake in the
company on 3 July 2008. However, this information was not shared with
the exchanges for over seven years. NDTV disclosed this information to
BSE on 3 July 2015 and to NSE on 14 January 2016 as per the finding from
the market regulator.
Two years later, on 8 March 2010, both Prannoy and Radhika Roy bought
5.55% stake each in NDTV from RRPR Holdings Pvt Ltd. According to SEBI
finding, while this disclosure was made on BSE, there was no information
shared with NSE till 14 January 2016, which is violation of Takeover
Regulations.
NDTV also failed to disclosed information to NSE about its annual
filing. The company shared its annual disclosure for 2008 with NSE after
a delay of 170 days. For the 2010 annual disclosure, NDTV shared the
information with BSE, but failed to do the same with NSE till 14 January
2016. NDTV shared the 2011 annual disclosure to BSE after a delay of 16
days, while again failing to disclose it with NSE, which received the
information only on 14 January 2016, the SEBI finding says.
Earlier in November 2015, in an affidavit filed in the Supreme Court,
the Enforcement Directorate (ED) has said it has received information
from the Central Bureau of Investigation (CBI) that NDTV Studios, an
Indian resident company, received Rs387.62 crore from NDTV (Media)
Mauritius Ltd in 2008 and a small portion of the funds was used for
investment in six new subsidiaries in India until 2009. In addition, in
2010, a major portion of the remaining funds, were invested in NDTV
Multimedia (Mauritius) Ltd and further, in two existing wholly-owned
subsidiaries in the Netherlands and UK through another subsidiary NDTV
Worldwide Mauritius Ltd. Thereafter, NDTV Studios and its six
subsidiaries were merged with NDTV thereby creating doubts about the
purpose of their setting up as well as the sources of funds for NDTV
(Media) Mauritius and the need to set up various companies in Mauritius.
(Read: CBI, ED questions genuineness of NDTV transactions through Mauritius ; NDTV says it received show notice from ED on FEMA violations; ED charges amount involved is Rs2,030 crore )
Last year in June, SEBI levied a penalty of Rs2 crore on NDTV for
company's failure to disclose information about the Income Tax demand
notice to the Exchanges. (Read: SEBI imposes Rs2 crore penalty on NDTV for late disclosures
). The case related to non-disclosure of the Rs450 demand notice served
by the Income Tax department on 21 February 2014 to the stock exchanges
as is mandated by Clause 36 of the listing agreement. NDTV’s failure to
disclose the notice, for wider dissemination to shareholders was taken
up by the regulator for action.
"The disputed amount of Rs450 crores in the tax demand is noted to be
significant when compared with Rs349.77 crores of revenue of Noticee for
the year ended 31 March 2014 as also the net worth of Rs365 crores as
on 31 March 2014. The company has consistently posted a net loss for the
past five years. The net loss in FY 2014 amounts to Rs.53.56crores. In
view above, Noticee should have made voluntary disclosures to stock
exchanges on an immediate and prompt basis.
Although it is the prerogative of companies to decide on materiality,
in this case, the amount is material particularly considering the
financials of the Company and information ought to have been disclosed.
It is noted that the amount involved in the income tax demand was larger
than the revenue of the company and significantly larger than its net
profit i.e. net loss in the recent financial year as also greater than
its net worth," the SEBI order dated 4 June 2015 said.
At 1.10pm Wednesday, NDTV was trading 1% up at Rs94 on the BSE, while
the 30-share Sensex was also marginally higher at 26,525.
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