Do Radhika and Prannoy Roy, founders of NDTV, still 'solely' control of the channel? Observation by SEBI in one its recent orders shows that Vishva Pradhan Commercial (VPCL), a company belonging to Mahendra Nahata, a close associate of Mukesh Ambani, may have a hold on 52 per cent shares in NDTV via the promoters. Simply put, even though Radhika and Prannoy Roy may own majority stake in NDTV, VPCL may be exerting control over the company via certain agreements it has executed with the Roys.

A recent order by SEBI's Whole Time Member, G Mahalingam, has laid bare the “true nature of the transaction (between VPCL and the Roys), which was acquisition of beneficial interest in NDTV, shrouded in loan and call option agreements."

“The elaborate mechanism adopted by the noticee (VPCL) and its associates appear to be solely to deflect attention from this acquisition (of NDTV) and thus covetously overcome the obligations imposed by the takeover regulations," the SEBI order said.

SEBI did not go into the ownership structure of VPCL.

Some time between 2013 and 2017, the ownership of VPCL came to Nahata. An RIL spokesperson declined to comment on the SEBI order and other queries and said that VPCL does not belong to them. When contacted Nahata, who is a member of the Reliance Jio board, said he may be able to go through the queries only the next day. But sources close to VPCL said that it may challenge the SEBI report in SAT.

Responding to an e-mail query from BusinessLine on the specifics of the SEBI order, NDTV directed the reporter to a link on its website, which carries its statement.

“NDTV's promoters, Radhika and Prannoy Roy, are career journalists. At no point has control of NDTV's editorial policies or its business plans been directly or indirectly yielded to a third party. No shares have ever been transferred by the promoters to anyone else. VCPL, the company that gave loan to the promoters, has never been represented by even one director on NDTV's board. NDTV has never ceded even an iota of editorial rights to anyone outside the company. The promoters reserve the right to contest any finding or verdict that suggests otherwise," reads the statement.

But experts say the SEBI order is not stating that the Roys had ceded their “editorial control" or yielded their business plans to a third party. SEBI's order throws light on how the ultimate beneficiary ownership of NDTV may now be with VPCL.

The SEBI order states: “The takeover exercise has been conveniently couched as a loan agreement with the predominant intention of the noticee (VPCL) being to acquire control over NDTV without contemplating any repayment of the loan, whatsoever, from the Promoters or Borrowers.”

"The transaction documents admittedly confer conversion option, purchase option and the call option, and if the voting right is to give full effect to the transaction documents, it would straightaway mean that 52 per cent of the voting rights of NDTV have to be exercised by the Promoters (the Roys) as per the dictates of the lender (VPCL) and the same may traverse the specified veto rights," the order added.

SEBI findings show the loan, unsecured and without any interest payment, was granted to RRPR for a period of 10 years that end in July 2019.

RRPR belongs to the Roys and it issued convertible warrants to VPCL, aggregating 99.99 per cent of fully diluted equity share capital to RRPR at the time of conversion, 'convertible at anytime during the tenure of the loan or thereafter.'

The agreement also gives the right to VPCL to purchase from promoters all the equity shares of RRPR at par value. This apart, there were two ‘call option' agreements that were contemporaneously entered into between associate companies of then VPCL shareholders and RRPR. According to the SEBI report, the noticee had vide letter dated March 25, 2016 stated that the "source for the loan was the borrowing from Reliance Strategic Investment Limited, a wholly owned subsidiary of Reliance Industries Limited."

"All the aforestated concerns attached to the manner in which the loan agreements and call option agreements were entered into and the subsequent conduct of the noticee do not substantiate its argument that the transaction was only in the nature of a loan.

“ In effect, the transaction is not to secure the loan but to acquire control over all the affairs of the target company (NDTV) leaving only the right to control the “editorial policies of NDTV” to the promoters and borrowers, right from the day of execution of the loan agreement. What is certain is the idea of the noticee (VPCL) to start exercising control through the promoters (Roys) by keeping a tight hold on 52 per cent of the shares of NDTV, through the threefold options conveyed by the promoters," the SEBI order states.