Promoter entities of the Network18 Group started releasing shares they had pledged with lenders, even as the deal with Reliance Industries was getting finalised. According to back of envelope calculations, the value of shares released in the past two weeks worked out to be Rs 262 crore.
According to regulatory filings, two promoter group entities, Network18 Group Senior Professional Welfare Trust and Network Media and Investments, released 26.1 million TV18 Broadcast shares pledged with seven different lenders, beginning from the last week of December. Another entity released 32.4 million shares pledged with JM Financial Products on December 27, 28 and 29. At Wednesday’s closing price of Rs 35.95, the value of these shares worked out to be Rs 210 crore.
These releases were put together from four regulatory filings on December 23 and 29, and January 2 and 4.
Similarly, two promoter entities released pledges on shares of Network18 Media, according to two regulatory filings by the company on December 30. Network18 Group Senior Professionals Welfare Trust and Network 18 Media Trust released a little over 10 million shares between December 22 and 28. These shares were worth Rs 51.5 crore at Wednesday’s closing price of Rs 51.35.
The filings showed the shares were pledged with eight lenders, all of which were non-banking finance companies. They included Religare Finvest, L&T Finance, L&T Infrastructure Finance, India Infoline Investment Services, JM Financial Products, Aditya Birla Finance and Sicom.
Business Standard reported the talks of a three-way deal between Network18 group, Eenadu group and Reliance on December 14. Subsequently, the Wall Street Journal reported Mukesh Ambani planned to buy a stake in Network18 on December 20.
Some analysts said the releases would enable the promoter group entities to subscribe freely for the rights issues. “In a normal course, entitlement of rights rests with the promoter. However, the promoter has the power to renounce this right in favour of any other person, including a pledgee,” said a company law expert, who did not want to be identified.
According to him, if the promoters have entered into contractual obligation to vest such rights with the pledgee or the lender, they would have to get out of such obligation to subscribe the rights issue. “Release of the pledge would extinguish such obligations in one go,” he said.
Business Standard could not independently verify if there were such contractual obligations. Lenders refused to comment, citing client confidentiality. Calls and text messages to Raghav Bahl, founder and managing director of the group, did not elicit any response. An email questionnaire sent to the group spokesperson also did not elicit any response.
| WAY OUT | |||
| Date | Promoter entity | Lender | Shares released in mn |
| TV 18 Broadcast | |||
| 23-Dec | Network18 Media & Investments | Aditya Birla | 1.1 |
| 29 Dec / Jan 2 | NA | JM Financial | 32.5 |
| 4-Jan | Network18 Senior Professionals Trust | Religare Finvest | 13 |
| 4-Jan | Network18 Senior Professionals Trust | IIFL | 3.2 |
| 4-Jan | Network18 Senior Professionals Trust | Sicom | 3.5 |
| 4-Jan | Network18 Senior Professionals Trust | Sicom & L&T Infra | 1.1 |
| 4-Jan | Network18 Senior Professionals Trust | L&T Finance | 4.2 |
| Total | 58.6 | ||
| Network18 | |||
| 30-Dec | Network18 Group Senior Professional Welfare Trust | Aditya Birla | 0.3 |
| 30-Dec | Network18 Group Senior Professional Welfare Trust | Religare | 2.9 |
| 30-Dec | Network18 Group Senior Professional Welfare Trust | Religare | 0.5 |
| 30-Dec | Network18 Group Senior Professional Welfare Trust | India Infoline | 3.2 |
| 30-Dec | Network18 Media Trust | Aditya Birla | 0.4 |
| 30-Dec | Network18 Media Trust | Religare | 2 |
| 30-Dec | Network18 Media Trust | JM Financial | 0.7 |
| Total | 10 | ||
| Source: BSE filings by companies, lenders | |||
Falling share prices and resultant margin calls have led to a substantial increase in share pledges by promoters of the Network18 group in the last two quarters.
Shares pledged by TV18 promoters have almost doubled in the past six months, according to recent regulatory filings by the company. At the end of June, shares pledged by promoter entities of TV18 stood at 34.71 per cent of the promoters’ stake. This has swelled to 62.87 per cent, according to the latest filing. Similarly, pledged shares of promoters have increased from 37 per cent to 58 per cent of the promoter holding in the past six months. A part of this was due to falling share prices.
The Network18 and TV18 stocks have dipped from their 52-week highs of Rs 175 and Rs 110 to Rs 35 and Rs 25, respectively, adding to margin calls and increase in the amount of pledges.
