Surrogate media ownership
TALKING MEDIA
Sevanti Ninan
Governance issues get a lot of airing at election time. But what’s the right season to focus on media governance? There isn’t one apparently. The media doesn’t think it is necessary to discuss at all, and the current government is unenthusiastic about throwing its weight behind regulatory issues that the Telecom Regulatory Authority of India (TRAI) wishes to confront media houses on. Such as sticking to limits on advertising minutes per hour, or norms governing media ownership.
As media ownership gets more varied and colourful, it has become the one governance issue crying out for more transparency. Token rules exist for both the print media and television: there is a Form IV declaration that all publications are required to publish once a year. It stipulates naming all those individuals and companies holding more than one percent stake in the ownership of that publication. What it does not require to be declared is what percentage of stake those parties hold. So you cannot judge whether any of the declared owners has controlling shares.
Where television channels are concerned the Ministry of information and broadcasting requires declarations of ownership in its uplink/downlink permission guidelines. But these are for its own edification. There is no requirement of a public declaration in this regard on the channels website. It is only the listed media companies which have to make ownership details public. Neither set of requirements ask for groups of companies investing in a media house, rather than individual companies, to be disclosed.
The majority of media companies are unlisted, and while you can get their ownership details from the database of the Registrar of Companies, it is not easy. The penalty for not updating information is just a few hundred rupees, so they are often not updated. And companies registered in the states for instance, file their balance sheets, at the regional RoC offices, often in the regional language.
Then we get to surrogate ownership. While there is a fair amount of that, nobody knows just how much. And it is fascinating to look at the intricacy with which this is done, in the latest case which has come to light. Journalist Paranjoy Guha Thakurta has reported the case in detail on a website I edit. It concern’s Reliance Industries Limited’s (RIL) group companies and their complex web of investments in the companies which launched the media group called 9X and the news channel called NewsX in 2006 and 2007.
Inspectors of the Serious Fraud Investigation Office (SFIO) of the Department of Company Affairs apparently stumbled upon media related investments which seemed fraudulent while conducting other investigations (the term they use in their report is “sham transactions”) and set about unearthing very intricate details of a deal, complete with flow charts, to establish how the original news media company floated by Peter and Indrani Mukerjea in 2006 was actually a front for RIL companies, and how the front end of the ownership changed later with the news-media related company acquiring another set of apparent owners in 2008-09.
The Serious Fraud Investigation Office is purportedly out of bounds for the press. The gatekeepers are flummoxed when a journalist wants to sign in. But the media are not allowed here, they tell you. If even so the investigations were leaked, was it because of frustration? Dogged hard work has gone into establishing something that the government perhaps does not want to pursue at all, particularly in an election year.
According to the report of the investigators which was submitted to the Supreme Court on November 11 by the Centre for Public Interest Litigation, (CPIL) there is also an FDI angle to the surrogacy. The entertainment company 9X had the multinational investment firm New Silk Route as an investor. To have 9x and NewsX as linked companies would have violated the FDI restriction on foreign investment in news channels.
In its report the SFIO recommends prosecution of the directors of the various companies involved. Well known journalists figure there. The covering letter of the detailed document lists 4 matters in which they have come up with charges after investigation. Three relate to media companies: the NewsX sale, the Eenadu sale, and a case relating to Niira Radia’s company Ms Neucom Pvt Ltd. which was involved in providing media related services. The papers relating to the Eenadu sale have not been made available by CPIL.
Once it was submitted in the Supreme Court, CPIL helpfully despatched the documents to several journalists on their list. Before this they were leaked to two media houses that I know of, neither of those used them.
An earlier instance of surrogate ownership involved Eenadu, and RIL, and came to light once the latter group formally declared investment linkages which both Eenadu TV and Network 18 in January 2012. After the Central Government blocked clearance of an FDI investment by the Blackstone Group in Eenadu, banker Nimesh Kampani stepped in with an investment of Rs 1200 crore in the company which publishes Eenadu, Ushodaya Enterprises. This was in 2008. Later, with the January 2012 acquisition of the debt of Network 18 it was widely reported that Kampani had fronted for RIL companies when he invested in Eenadu in 2008.
If one runs through the list of media companies ostensibly owned by politicians, hardly any of them have direct links with these individuals going by information filed with the registrar of companies. YSR Reddy’s family in Andhra Pradesh is an exception. The investment is usually through front companies.
Here then is a media governance issue that is ripe for regulatory intervention. But the media is in no mood to make an issue of it, so the government of day will probably look the other way and let the SFIO cool its heels.
(Reprinted from Mint, November 14, 2013)