 "Sebi probe against two Goldman entities in NDTV stake buy")
The Securities and Exchange Board of India (Sebi) has initiated adjudication proceedings against two entities of Goldman Sachs for alleged violation of takeover norms while buying shares of listed broadcaster New Delhi Television (NDTV).
The proceedings pertain to certain transactions dating back to April-July 2008, when Goldman Sachs Investment (Mauritius) Ltd (GSIM) and GS Mace Holding, a Mauritius–based sub-account, together acquired 9.13 million shares, or a 14.6 per cent stake, in the company.
In the first tranche in April, GSIM bought 5.1 million shares. Of this, 4.9 million shares came from NDTV promoters Radhika Roy and Prannoy Roy. In the second tranche, GS Mace along with GSIM as person acting in concert (PAC) bought 4.03 million shares, bulk of which came from RRPR Holding, another promoter group shareholder controlled by the Roys. At the Rs 400 levels the stock was trading at that time, the deals would have been worth around Rs 360 crore.
In an affidavit filed before the Delhi High court dated August 22, the regulator said “adjudication proceedings were initiated against GS Mace Holdings Ltd with Goldman Sachs Investments (Mauritius) Ltd as PAC for alleged violation of Regulation 7(1) of SAST (Substantial Acquisition of Shares and Takeovers) Regulations, 1997…” The affidavit was filed in compliance of an April order by the court to give a status report in the case between NDTV and Quantum Securities, a minority shareholder.
The deals were disclosed as open market transactions in a filing to the BSE. However, Sebi has received complaints that these were part of a negotiated agreement between the promoters and Goldman Sachs and the relevant details were not disclosed to the exchanges. Emails to Goldman Sachs executives in India and the US did not elicit any response. A Sebi spokesperson also did not respond to an email seeking comments.
In support of its claims, Quantum is said to have submitted to Sebi a binding term sheet dated March 7, 2008 signed by Goldman Sachs representatives and the Roys. It was for purchase from promoters five million equity shares, or 7.73 per cent, with an option to take it up to 14.99 per cent.
A copy of this term sheet reviewed by Business Standard showed that the agreement involved a board representation. “The investor shall subject to receipt of regulatory approvals, have the right to representation on the board of directors of the company, with the right to nominate one director (investor nominee) on the board at all times so long as the investor holds the threshold equity shares,” the term sheet said.
Heramb Hajarnavis, then a Mumbai-based vice-president in the merchant banking division of Goldman Sachs & Co, joined the NDTV board in January 2009 and continued till September that year. Hajarnavis, who now runs a private equity firm, did not respond to a text message. The term sheet also gave certain affirmative and tag-along rights to the investors. It also barred the shares from being further intentionally sold to certain “restricted entities” namely TV18, Zee, News Corp and the Reliance Anil Ambani group.
The Sebi affidavit also gave the status on various complaints against NDTV and its promoters. On four cases, Sebi did not find any violation, while on others, the proceedings were pending at different stages. In June, NDTV had disclosed on the exchanges that it had received a showcause notice from Sebi on various transactions by promoters. “The company is of the opinion that the alleged non-compliances referred in the SCN (showcause notice) are technical/procedural in nature. The company is in the process of seeking legal advice to appropriate action in the said matter,” NDTV had told the exchanges.
In addition to these, the Sebi affidavit said it had initiated adjudication proceedings against NDTV and its executive vice-chairperson K V L Narayana Rao. “With regard to the disclosure requirement for transactions done by K V L Narayana Rao, executive vice-chairperson of the company during period from December 16, 2013 to January 15, 2014, it was observed that K V L Narayana Rao and NDTV had made delayed disclosures under PIT (Prohibition of Insider Trading) Regulations, 1992,” Sebi said.
On the allegation pertaining to change of control due to a loan of Rs 404 crore from Vishwapradhan Commercial, Sebi said: “Submissions from acquirer have been received on March 25, 2016 and the matter is under examination and is being dealt with on priority basis.”
In a text response an email seeking comments, an NDTV spokesperson said replies were sent to Sebi in the last week of September.
The shares bought by Goldman Sachs have had an interesting journey since then. In April 2011, GSIM sold 7.92 per cent it had to Merrill Lynch Capital Markets Espana S.A. SVB, and GS Mace sold 6.25 per cent it had to Nomura Mauritius. The deals happened around Rs 76, a loss of over three-fourth of the value.
Months later, in December 2011, Abhey Oswal-promoted Oswal Greentech acquired this 14.17 per cent from Merrill Lynch and Nomura. The prices had by now come down further to Rs 26 levels. Oswal, the father-in-law of industrialist Naveen Jindal, passed away in March.
Coincidentally, a week after the Sebi affidavit, in two separate deals on August 29 and September 1, the Oswal Group offloaded the entire holding booking a decent profit to two foreign portfolio investors. The shares were trading in the range of Rs 90 apiece at this time. According to the latest shareholding pattern, as on September 30, LTS Investment Fund owns 9.75 per cent and Eriska Investment fund 4.42 per cent. NDTV shares fell marginally to close at Rs 84.05 on the BSE on Friday.
