Sebi seeks fresh info on Reliance-Network 18 deal

The Securities and Exchange Board of India (Sebi) has sought additional information from Reliance Industries (RIL) on the takeover of Network18 and TV18 Broadcast. The two firms, which are being taken over by RIL through its Independent Media Trust (IMT), control an array of media properties, including leading business and general news channels CNBC TV18 and CNN-IBN.

"Sebi has sought additional information from time to time, which has been provided," RIL told Business Standard in response to an email query seeking comments. "Sebi has not asked for any revision of offer price," the RIL spokesman added.

Although the takeover was announced in May and the filings with Sebi were made as early as June this year, the regulator is still studying the details of the multi-layered deal that involved several entities, instruments such as zero coupon convertible debentures and shareholder agreements.

IMT, the main acquirer, itself went through many changes from the time the cash infusion through trust structure was announced in January 2012 to the eventual takeover announcement in May 2014. It was initially envisaged as an independent trust with eminent people at the helm, but was controlled by an entity owned by NW18 founder Raghav Bahl, who later gave way to senior Reliance group officials.

According to the tentative schedule of activity announced by the companies in the detailed public statements published in June, August 27 was mentioned as the last date to publish the "post-offer announcement," marking the end of the open offer process.

However, in the wake of the fresh information and clarifications sought by Sebi, the process has overshot this tentative timeline. Clause 18(4) of Sebi takeover regulations, 2011, says: "The Board shall give its comments on the draft letter of offer as expeditiously as possible but not later than 15 working days of the receipt of the draft letter of offer and in the event of no comments being issued by the Board within such period, it shall be deemed that the Board does not have comments to offer."

The draft offer documents for both the offers were received by Sebi on June 12, 2014. A proviso to the above clause says Sebi will clear the offer within five days of receiving a "satisfactory" answer from the merchant banker.

"Provided that in the event the Board has sought clarifications or additional information from the manager to the open offer, the period for issuance of comments shall be extended to the fifth working day from the date of receipt of satisfactory reply to the clarification or additional information sought," according to this proviso. Sebi also has the powers to direct the companies to revise any terms in the offer letter.

In a note on its website, the regulator said the last communication was sent to the merchant banker JM Financial on August 28. On Saturday, the Sebi website, which updates the processing status at the end of each week, showed the status of NW18 and TV18 offers as "under process". The status was as of September 12. This timeline suggests that Sebi and the bankers have had several interactions and are still trying to arrive at that "satisfactory reply."

An RIL spokesperson reiterated the timeline indicated earlier was only tentative, adding: "In terms of the Regulations, there is no fixed time line for Sebi to clear an Open Offer." He was also confident of an early clearance. "We expect Sebi to clear the open offer soon."

IMT, along with persons acting in concert - RIL and Reliance Industrial Investments and Holdings, RIL's subsidiary - has filed draft letters of offer with Sebi to acquire 21.9 per cent of Network 18 Media and Investments and 26 per cent of TV18 Broadcast. While the offer for Network 18 shareholders was Rs 41.04 a share, totalling Rs 943.7 crore, that for TV18 was Rs 30.18 a share totalling Rs 1,347.57 crore. Investor fatigue seems to be setting in as the deal drags on.

The stocks, which had rallied significantly after the announcement to hit highs of Rs 69.55 and Rs 37.3 a share, respectively, have pared gains.

While Network 18 shares are still trading above the offer price at Rs 49.65, TV18 Broadcast shares have fallen marginally below, closing at Rs 29.25 on Friday.