The Big Five: The Media Companies That the Modi Government Must Scrutinise To Fulfill its Promise of Ending Crony Capitalism
Filings with the registrar of companies in the ministry of corporate affairs have revealed that five Indian news media companies—NDTV, News Nation, India TV, News24 and Network18—are either indebted to Mukesh Ambani, the richest Indian and the owner of Reliance Industries, or to Mahendra Nahata, an industrialist and associate of Ambani’s, who is also on the board of Reliance’s new telecom venture, Reliance Jio.
Through loans and investments, Ambani, Nahata and the industrialist Abhey Oswal have given the five media companies funds that range from tens to hundreds of crores of rupees. As a result, the control that the three businessmen wield over these media networks varies from 20 to over 70 percent. This is a cause for concern for the freedom of speech in this country. The state of affairs also raises questions about monopolistic practices that may be in conflict with the competition laws of India.
On 12 August 2014, the Telecom Regulatory Authority of India, TRAI, published a paper titled Recommendation on Media Ownership. In its opening remarks, the paper said, “The right to freedom of speech is essential for sustaining the vitality of democracy. This is why the right is sacrosanct; it is fiercely protected by the media. The question that arises is whether reposing such a right in the media simultaneously casts an obligation on the media to convey information and news that is accurate, truthful and unbiased.” “What happens in the media,” the paper went on to state, “is the concern of the entire country.”
The TRAI had highlighted this belief in the context of its argument that the ownership of media companies by a handful of entities would increase the “possibility of misuse of the rights of the media for interests that are not in the larger public good.” The paper warned against such structures because of their “negative impact on media diversity and plurality.” Elaborating on these fears, it stated, “There may be thousands of newspapers and hundreds of news channels in the news media market, but if they are all ‘controlled’ by only a handful of entities, then there is insufficient plurality of news and views presented to the people.”
A day after the paper was released, R Jagannathan, the former editor of the Indian news website Firstpost, published an editorial on the website that declared, “Trai’smedia ownership curbs make no sense: half of India’s media may have to shut down.” Jagannathan opened his piece by saying that TRAI’s recommendations “need to be thrown in the nearest dustbin.” Arguing that the lack of corporate finance in media companies was no assurance of an impartial media, Jagannathan valiantly defended the current structure, going so far as to assert that the TRAI’s recommendations would only create a more opaque system. “If corporates want to run media houses,” he noted, “they will do so, Trai or no Trai.” Jagannathan’s blanket dismissal of the recommendations was not surprising; only perhaps, a little ironic. The website whose editorial direction he was steering at that time, and on which he had published this point of view, is a part of Network18, a media conglomerate that owns CNN-IBN, IBN 7, CNBC Awaaz, CNBC TV18, IBN Lokmat and Firstpost.
In his editorial, Jagannathan said, “Given the growing non-viability of media, a lot of corporate money has come in to support news media.” Nahata and Ambani appear to excel in extending such support. Since television news in India is not a lucrative business, the generosity of these two businessmen is called upon frequently. Such favours, it is safe to conclude, are not acts of philanthropy.
Transactions of this nature are rarely straightforward. As the TRAI paper observed, “there are numerous other ways by which an entity can exercise control over another.” This prophetic finding is validated through the complicated structures that both Ambani and Nahata have used to invest in the five media companies. The control that they exert over these groups is a function of the investments they have made through direct loans, Optionally Fully Convertible Debentures (OFCDs)—loans that can be converted into shares at the investor’s discretion—and direct ownership of shares.
The two centerpieces of this complex jigsaw puzzle are Shinano Retail, a wholly owned subsidiary of Reliance, and Vishvapradhan Commercial Private Limited (VCPL). VCPL was earlier owned in part by Shinano and another Reliance subsidiary. As I had noted in my December 2015 story on NDTV, VCPL’s directors, Ashwin Khasgiwala and Kalpana Srinivasan, were both employees of Reliance. The company was also registered under the same address as Shinano. In an affidavit submitted to the Delhi High Court in September 2015, the income tax department quoted its report from June 2011, stating that VCPL “has no business activity and is not a genuine concern.” In the financial year 2012, VCPL was sold to Infotel Televentures and Skyblue Buildwell, both of which are entities related to Nahata.
In May 2014, Reliance Industries Limited (RIL) acquired Network18 for Rs 4,000 crore. A statement on shareholding patterns that was released by Network18 on 30 September 2015 lists Shinano as one of its two promoter groups. Shinano holds 1.85 percent of Network18’s shares. This is a part of the 75 percent stake that RIL owns in Network18.
The transactions that diluted the ownership of Radhika and Prannoy Roy—the co-founders of NDTV—over their channel are slightly more complex. Between 2009 and 2010, the Roys took a loan of Rs 403.85 crore from VPCL and signed an agreement on behalf of Radhika Roy Prannoy Roy Holdings Private Limited, or RRPR—an entity that they set up in 2005, and in which they placed NDTV’s shares beginning mid-2008. The agreement gave VCPL the right to convert this loan into 99.9 percent of RRPR’s equity—effectively, complete ownership—not just during the period of the loan but even after. By the time RRPR got the loan in March 2009, its total shareholding in NDTV was 29.18 percent, and the agreement effectively sold this portion of NDTV’s shares to VCPL. In the 2012 financial year, VCPL received Rs 50 crore from Eminent Networks, a company owned by Nahata. All of these loans were interest-free and unsecured. Although the money Eminent lent to VCPL was much less than the amount that VCPL had lent to RRPR—Rs 403.85 crore—it now owns OFCDs worth the same amount with VCPL. This may also mean that Eminent has now taken over the 29.18 percent of NDTV that VCPL owned. Which entity among these indirectly controls NDTV is not clear at the moment. It is, however, certain that these transactions have resulted in the Roys losing a significant amount of control over their company.
Eminent also features in the account books of News24—a 24-hour Hindi news channel—and E24 Glamour, an entertainment channel. Both News24 and E24 are owned by Anuradha Prasad. As of March 2014, News24 had taken a loan of Rs 12.5 crore from Eminent. This loan was taken in the form of OFCDs. According to the agreement, the OFCDs could be converted into equity at any point during a period of eight years, starting from the date on which the debentures were allotted to Eminent. The debentures were worth approximately 36 percent of News24’s paid-up capital—the amount of its capital that was funded by its shareholders. This loan had originally been given to News24 by another Nahata company, Digivision Holdings, which transferred the debentures to Eminent on 14 November 2013. As of March 2014, Eminent also lent Rs 12.5 crore to E24 Glamour in the form of OFCDs. During the 2013 financial year, E24 Glamour invested close to Rs 63 crore in the form of OFCDs in a company called Oscar Software. Oscar owns over 18.6 percent of News24’s shares. This would mean that E24 Glamour, which is indebted to Eminent, exerts an indirect control over News24.
According to a February 2015 Economic Times report by Rohini Singh and Vasudha Venugopal, the journalist Rajat Sharma’s India TV does not fare much better in this regard either. In September 2012, Nahata’s Infotel—which owns half of VCPL—bought 23 percent of India TV’s shares from Shyam Equities, a company that is related to Reliance Industries. Shyam had bought this stake for Rs 100 crore in 2007. It was sold to Infotel for Rs 12.5 crore.
This sphere of influence also extends to News Nation, a 24-hour Hindi News television channel which is headed by the industrialist Abhey Oswal. Oswal Greentech and Oswal Agro, companies that are owned by Oswal, own 3.64 crore shares in News Nation, which amount to about 50 percent of the channel’s shares. Last year, in November, Digivision Media, (Nahata’s company that owns 50 percent of Infotel) invested Rs 10 crore in News Nation in exchange for 10 lakh non-cumulative redeemable preference shares. A preference share ensures that the holder of the share is assured a fixed sum of money—and on priority over other kinds of shareholders—from the company’s reserves or profits. A non-cumulative preference share would mean that Digivision would not be entitled to claim a foregone dividend that News Nation did not pay in a particular month or year, at a later date. Since the preference share is redeemable, News Nation would have to pay back the amount of money that Digivision had invested in it, on a date that would have been agreed upon by both the companies. The amount that Digivision invested accounts for 13.9 percent of the paid-up capital of News Nation. Shinano already owns 1.3 crore shares in News Nation, which are worth 18 percent of the channel’s equity.
The media groups in which Ambani and Nahata have invested are aligned to all hues of the political spectrum. Prasad, the owner of News24 and E24 Glamour, is married to the Congress leader and Indian Premier League Chairman Rajeev Shukla. She is also the sister of Bharatiya Janata Party’s Ravi Shankar Prasad, who is the telecom minister of India. India TV’s Sharma is perceived to be close to the BJP. As a student, he was a leader of the Akhil Bharatiya Vidhyarthi Parishad—the BJP’s student wing—and a member of the Rashtriya Swayamsevak Sangh. NDTV’s co-promoter Radhika Roy is the sister of Brinda Karat, a senior Communist Party of India leader. Apart from his shares in News Nation, Abhey Oswal, whose son-in-law Naveen Jindal is an industrialist and a Congress leader, also owns 14.17 percent of NDTV.
This information is already with the government. Not all of these investments were made during the last year, of course. Several of them were made when the Congress government was at the centre. But, the BJP had come to power with promises of ending crony capitalism. Will it act against industrialists such as Ambani and Nahata by initiating an enquiry into the five media houses to provide a non-monopolistic media business?
Three of the ministries that can act against this concentrated ownership of the media—the ministry of corporate affairs, the ministry of information and broadcast, and the ministry of finance—are all headed by Arun Jaitley, who maintains a largely favourable relationship with both the media, and media owners. Jaitley is particularly close to Sharma, who is also deposing for the minister in his defamation suit against Arvind Kejriwal, the chief minister of Delhi.
On 4 January 2016, I sent a questionnaire to Nahata. He responded by saying that his investments in media were not “strategic” but “portfolio investments made from time to time.” According to Nahata, his companies were not acting in concert with any other entity. He added that since he did not “control any media entity,” there is no threat of a monopoly.
Reliance’s spokesperson Tushar Pania responded to my queries by saying: “Reliance group has invested in Network 18 [sic] group of companies through Independent Media Trust. TV 18 [sic] a subsidiary of Network 18 and Shinano, a company 100 [percent] economically owned by Reliance Industries also holds investment in ETV channels.” ETV is a Hyderabad-based satellite television network. “The group,” Pania wrote, “does not hold any media investment in any form apart from this.”