Combination Registration No. C-2012/03/47. Case: CCI Vs Zero Coupon Optionally Convertible Debentures. Competition Commision of India

Case NumberCombination Registration No. C-2012/03/47
JudgesAshok Chawla, Chairperson, H.C. Gupta, Member (G), R. Prasad, Member (R), P.N. Parashar, Member (P), Geeta Gouri, Member (GG), Anurag Goel, Member (AG), M.L. Tayal, Member (T) and Shiv Narayan Dhingra, Member (D)
IssueCompetition Act, 2002 - Sections 2, 20(4), 31, 31 (1), 5(a), 6
Judgement DateMay 28, 2012
CourtCompetition Commision of India

Order:

Order under Section 31 (1) of the Competition Act, 2002

  1. INTRODUCTION

    1. On 27th March, 2012, the Competition Commission of India (hereinafter referred to as the "Commission") received a notice under sub-section (2) of Section 6 of the Competition Act, 2002 (hereinafter referred to as the "Act") relating to the proposed subscription to the Zero Coupon Optionally Convertible Debentures (hereinafter referred to as "ZOCDs") of RB Mediasoft Private Limited, RRB Mediasoft Private Limited, RB Media Holdings Private Limited, Adventure Marketing Private Limited, Watermark Infratech Private Limited and Colorful Media Private Limited (hereinafter all these companies collectively referred to as "target companies") by Independent Media Trust (hereinafter referred to as "IMT"). The notice was given to the Commission pursuant to the execution of an Investment Agreement on 27th February, 2002 between the target companies, IMT, Mr. Raghav Bahl and Ms. Ritu Kapur (hereinafter referred to as the "Investment Agreement").

    2. In terms of Regulation 14 of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (hereinafter referred to as "Combination Regulations"), vide letter dated 4th April, 2012, IMT was required to remove defect(s) and furnish certain information/document(s). IMT filed its response to the said communication on 23rd April, 2012.

    3. In terms of sub-regulation (4) of Regulation 5 and sub-regulation (2) of Regulation 19 of the Combination Regulations, vide letter dated 9th May, 2012, IMT was required to provide additional information. IMT filed its response to the said letter on 23rd May, 2012.

  2. COMBINATION

    1. As per the details disclosed in the notice and the documents annexed thereof, the proposed combination comprises of the following acquisitions that are inter-connected or inter-dependent on each other:

      (a) IMT proposes to subscribe to the ZOCDs that are to be issued by the target companies, which are stated to be presently owned and controlled by Mr. Raghav Bahl. It has been stated in the notice that before the said subscription, Mr. Raghav Bahl and his affiliates who own and control around 40 per cent of the equity share capital of Network 18 Media and Investments Ltd. (hereinafter referred to as "Network 18") would transfer their entire shareholding of around 40 per cent to the target companies. The holder of the said ZOCDs that are proposed to be subscribed has the option to convert the ZOCDs into equity shares of the target companies at any time before the expiry of ten years from the day on which the ZOCDs are subscribed. Further, upon conversion of all the ZOCDs into equity shares, IMT would hold more than 99.9 per cent of the fully diluted equity share capital of each of the target companies.

      (b) The target companies propose to use the proceeds from the issue of the ZOCDs to subscribe to the proposed rights issue of equity shares of Network 18. Network 18 proposes to raise INR 2700 crores through its rights issue.

      (c) Network 18 proposes to use the proceeds from its rights issue to repay its debts of around INR 1300 crores and the rest of around INR 1400 crores to subscribe to the rights issue of TV 18 Broadcast Limited (hereinafter referred to as "TV 18"), in which it currently owns 51.24 per cent of the paid up equity share capital. TV 18 proposes to raise INR 2700 crores through its rights issue.

      (d) TV 18 proposes to use the proceeds from its rights issue to repay its debts of around INR 750 crores and the rest of around INR 1950 crores to acquire 100 per cent equity securities of Equator Trading Enterprise Private Limited (hereinafter referred to as "Equator").

    2. As a condition precedent to the subscription of ZOCDs of the target companies, Network 18, TV 18 and Infotel Broadband Services Limited (hereinafter referred to as "Infotel") have entered into a Content Licence and Services Agreement dated 27th February, 2012 (hereinafter referred to as "Content Licence Agreement"), pursuant to which Infotel would have preferential access to the programming and digital content of all the broadcasting channels and other content of Network 18 Group on a first right basis as the most preferred customer

  3. PARTIES INVOLVED IN THE COMBINATION

    1. IMT is a trust established for the exclusive benefit of Reliance Industries Limited (hereinafter referred to as "RIL") for the purpose of holding the trust fund on trust exclusively on behalf of and for the benefit of RIL in accordance with the terms contained in trust deed dated 22nd November, 2011. RIL is a listed company incorporated under the provisions of the Companies Act, 1956. RIL operates in various businesses ranging from exploration and production of oil and gas; petroleum refining and marketing; petrochemicals comprising polymers, polyester and fibre intermediates; textiles; retail; telecom services etc. RIL operates in the above sectors directly and through its subsidiaries and joint ventures (all the companies of RIL are collectively referred to as "RIL Group").

    2. Infotel is a subsidiary of RIL which proposes to offer broadband internet services using 4G technologies. For the said purpose, it holds Category A All-India Internet Service Provider License issued by Department of Telecommunications (DoT), Ministry of Communications & Information Technology. Infotel has also been the successful bidder in broadband wireless access (BWA) spectrum auction conducted by DoT in 2010 and holds spectrum across all the 22 circles in India.

    3. The target companies, whose ZOCDs are proposed to be acquired by IMT are private limited companies incorporated under the provisions of the Companies Act, 1956 and are presently owned and controlled by Mr. Raghav Bahl. The Target Companies hold some of the shares of Network 18 and TV 18. It has been stated in the notice that Mr. Raghav Bahl and his affiliates who own and control around 40 per cent of the equity share capital of Network 18 would transfer their entire shareholding of around 40 per cent to the target companies.

    4. Network 18 is a listed company incorporated under the provisions of the Companies Act, 1956. Network 18 operates in media and entertainment sector, with interests in television, internet, film entertainment, digital content, e-commerce, magazines, mobile content, event management services and other allied businesses. Through its subsidiary TV 18, the Network 18 is engaged in programming, production and broadcasting of various news and general entertainment channels. Network 18 operates a number of digital, e-commerce and publishing properties including the web content properties such as...

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