MUMBAI: The path has been cleared for Network18 Media and Investments Ltd and TV18 Broadcast Ltd to raise Rs 27 billion each through rights issues.

The Securities and Exchange Board of India (Sebi) gave its observations on 17 August on the draft offer documents filed by Network18 and TV18 in March 2012. The companies now are required to go ahead with their rights issues within a year from the date of the observations.

Observations by Sebi are conveyed after the regulator seeks any clarifications it requires from the issuer. This basically allows a company to go ahead with its issue but is not a clearance or approval of the issue.

The funds are proposed to be raised for TV18?s acquisition of ETV news and general entertainment channels, except the Telugu GEC from Reliance Industries Ltd (RIL) for Rs 21 billion. RIL will fund the Network18 promoter companies for subscribing to the rights issues and in exchange will get optionally convertible debentures issued by the promoter companies.

The promoter companies of Network18 will need to invest Rs 17 billion to subscribe to their portion of the rights issue. The Network18 group has undertaken to subscribe to any unsubscribed portion of the rights issue in either of the companies.

RIL will lend a minimum of Rs 17 billion in the debentures. If none of the non-promoter shareholders subscribe to the rights issue, RIL will lend Rs 40 billion to Network18 promoters to ensure both the rights issues go through.

Since Network18 owns 50 per cent of TV18, the net capital raised from the rights issues will be Rs 40 billion.