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SEBI Makes Private Treaty Disclosures Mandatory; Who Will Enforce?

India’s stock market regulator, the Securities & Exchange Board of India has taken up the issue of private treaty deals between media groups and companies preparing for an IPO. According to such deals – an example here, of Mobile VAS company Planet 41 – a company gives stake in return for “media coverage through advertisements, news reports, advertorials etc. in the print or electronic media”. This results in a case of conflict of interest, and a dilution of the independence of press. SEBI believes that such “biased and motivated dissemination of information, guided by commercial considerations can potentially mislead investors in the securities market. Such journalism would not be in the interest of securities market.” SEBI knows of the manipulation of stock prices using the media only too well, as in case of the Nirmal Kotecha-Pyramid Saimira issue.

The stock exchange regulator has suggested the following guidelines to the Press Council of India:

1. Disclosures regarding stake held by the media company should be made in the news report/ article/ editorial in newspapers/television relating to the company in which the media group holds such stake.
2. Disclosure on percentage of stake held by media groups in various companies under such ‘Private Treaties’ on the website of media groups should be made.
3. Any other disclosures relating to such agreements such as any nominee of the media group on the Board of Directors of the company, any management control or other details which may be required to be disclosed and which may be a potential conflict of interest for media group, should also be mandatorily disclosed.

While SEBI has been forthright, the Press Council of India has “accepted” SEBI’s suggestions and has stated that “the above suggestions may be kept in mind by the media”. That’s not the same as mandating disclosures by media companies. Remember that this is the same Press Council which released a watered down, sanitized 13 page report on the issue of paid news , instead of a comprehensive and damning 71 page report from its own nominees. The initial report covered extortion from politicians using negative coverage, paid positive coverage during elections, and the issue of private treaties. MediaNama’s interview with S. Sivakumar on Private Treaties was also mentioned in the same report, which was leaked online.

Times Private Treaties is one of the few investment vehicles from media organizations that openly publishes its portfolio, but what about those like HT Media? HT Media’s private treaty portfolio is not public (we only know of IOL Netcom), though the company did say on its recent earnings conference it allocates around 5% of its quarterly advertising inventory to Private Treaties.

It’s one thing to mandate disclosures, quite another to enforce them. SEBI might be able to hold accountable listed companies, or those going for an IPO, but who will hold the media companies accountable? The same press council that released a modified report on Paid News? And how will this really make a difference if punitive measures aren’t included?


Press council’s original report on Paid News (download doc here)
– SEBI’s Guidelines on Paid News Disclosures
Planet41 & Private Treaties

Also, download Planet41’s DRHP here. Check
– page 22
– page 45, table 6b
– page 54, ‘sources & deployment of funds’
– page 103, pt. 16
– Page 106-114 has the contract, including shareholders agreement, investments, exit clauses

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