TV18 minority shareholders to move CLB on restructuring

Some minority shareholders of Television Eighteen (TV18) are going to file a petition with the Company Law Board (CLB) for disallowing the Network 18 group’s proposal to restructure its business. They say the proposal is unfair to them.

On June 7, the board of the Network 18 group approved a re-organisation plan to create a simplified two-listed-entity structure for the group. According to this structure, a shareholder who owns 100 shares of TV18 will receive 68 shares of IBN 18 (eventually new TV18) in consideration for transfer of business news channels and 13 shares of Network 18 in consideration for the transfer of the residual business. These exchange ratios were based on an independent valuation done by Grant Thornton.

However, some minority shareholders are of the view that these exchange ratios favour Network 18 shareholders at the cost of TV18 shareholders. “TV18 assets, which are worth at least Rs 1,300 crore, are being transferred to Network 18 for less than Rs 400 crore” said Porinju Veliyath, founder and chief executive officer of Equity Intelligence, a Securities and Exchange Board of India (Sebi)-registered portfolio manager.

According to Veliyath, 375 clients of his firm own seven lakh shares of TV18. “We will file a petition against TV18 under sections 397 and 398 of the Companies Act,” said Veliyath.

“Entities that are getting transferred to Network 18, Web 18, Infomedia 18, Newswire 18 and Capital 18, are all in the investment mode. These entities have made significant losses in the last two-three years,” said a media analyst with a domestic brokerage, who declined to be named.

Infomedia 18, Web 18 and Newswire 18 made losses to the tune of Rs 318 crore in the last three financial years ended March 31, 2010.“The future value of these entities depends on complete turnaround. That’s where the dispute lies,” he added.

An e-mail query sent to Haresh Chawla, group CEO – Network 18, and marked to Raghav Bahl, founder and managing director of Network 18, remained unanswered at the time of going to press.