Pranoy Roy
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NDTV founder Pranoy Roy in a file photo

Adani Group can’t acquire 99.5% stake without SEBI nod: NDTV


A day after NDTV alleged that a majority of its stocks were transferred to Vishvapradhan Commercial Pvt Ltd (VCPL), a subsidiary of Adani Group, without the knowledge of its founders or promoters, the media channel on Thursday (August 25) said that VCPL, along with AMG Media Networks Ltd. and Adani Enterprises Ltd. will need the approval of SEBI to buy 99.5 per cent interests in its promoter group.

“In view of directions in force vide order dated November 27, 2020, of the Securities and Exchange Board of India (SEBI), restraining the Founder-Promoters Dr. Prannoy Roy and Mrs. Radhika Roy from accessing the securities market, and further prohibiting buying, selling, or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner whatsoever for a period of two years, which expires on November 26, 2022, unless pending appeal proceedings were to successfully conclude prior, SEBI approval is necessary for the proposed Acquirer to secure 99.5 per cent interests in the Promoter Group vehicle, since this would consequently lead to acquisition of voting rights in respect of 29.18 per cent of the issued share capital of the Target Company held by the Promoter Group vehicle,” the company said in a regulatory filing on Thursday.

Also read: How an unpaid loan helped Adani to make hostile takeover bid for NDTV

On Wednesday, Gautam Adani’s company announced that it is all set to acquire 29.18 per cent stake in NDTV through a subsidiary company, and will launch an open offer to acquire another 26 per cent in the media company.

NDTV in a statement called the bid by Adani Group a “hostile takeover,” stating that a notice in this regard was served on the media firm without the knowledge of its founders or promoters.

“Without any discussion with NDTV or its founder-promoters, a notice has been served upon them by Vishvapradhan Commercial Pvt Ltd (VCPL), stating that it (VCPL) has exercised its rights to acquire 99.50 per cent control of RRPR Holding Pvt Ltd (RRPRH), the promoter-owned company that owns 29.18 per cent of NDTV,” NDTV said in a BSE release.

In an email to employees, Suparna Singh, head of NDTV Convergence Limited reiterated the claims, while hinting that the media house is mulling legal recourse.  “This acquisition was made without their (Radhika and Prannoy Roy) consent or without any sort of notice,” she said. “We are in the process of evaluating the next steps, many of which involve regulatory and legal processes,” she said.

Stating that the acquisition of RRPRH by VCPL was done on basis of a loan agreement dating back to 2009-2010, she said the Roys, however, still told 32 per cent of NDTV.

The news channel has been asked to transfer all its equity shares to VCPL within two days.

Terms of warrant vital, say legal experts

The key element behind the takeover bid is an unpaid loan that NDTVs promoter entity RRPR Holding Pvt Ltd had availed from VCPL. The entity had taken a loan of ₹403.85 crore in 2009-10 and against this amount, warrants were issued by RRPR. With the warrants, VCPL had the right to convert them into a 99.9 per cent stake in RRPR in case the loan was not repaid.

Adani Group firm first acquired VCPL from its new owner and exercised the option to convert unpaid debt into a 29.18 per cent stake in the news channel company. Thereafter, it made a ₹493 crore open offer to buy an additional 26 per cent stake from the public in line with the country’s takeover norms.

Also read: Not quitting: Ravish Kumar as NDTV counters takeover claims by Adani Group

According to some of the legal experts, the terms on which the warrants were issued would be crucial since the promoters of NDTV have claimed that they were completely unaware of the takeover until Tuesday, and that it was done without their consent or any discussion.

Ravi Kumar, Partner at IndusLaw, told PTI that typically, clauses for conversion of warrants do not require any prior intimation or consents from the issuing company. “If such things are part of the commercial understanding, those need to be clearly set out as part of the terms for conversion of the warrants.” “So it really depends on the contract there. And any dispute will get decided based on what the terms are,” he noted.

He noted that for any remedies that NDTV founders Prannoy Roy and Radhika Roy might seek, they will have to convince courts that the exercise of the warrants was not done on the basis of the terms.” “… this could also get into grounds of whether or not warrant conversion would require prior approval of the Ministry of information and Broadcasting,” he said.

According to the legal experts, Adani groups public announcement and open offer are well within the confines of the law. However, if the same is challenged by NDTV promoters, there is a possibility of a long legal battle.

Praveen Raju, Partner at Spice Route Legal, said the latest development is a classic repeat of the hostile takeover of Network 18 by Reliance in 2014. “If the warrants issued by RRPR Holdings Pvt Ltd to VCPL are convertible into equity at the option of VCPL, the public announcement and open offer by VCPL are well within confines of the law,” he said. The requirement of any consultation with or consent of the promoters would only arise if there is a contractual requirement to do so in the loan agreements with VCPL, legal experts  told PTI.

Also read: Gautam Adani made more money than Elon Musk, Jeff Bezos in Q4

Meanwhile, NDTV’s share price rose 5 per cent, hitting the upper circuit in opening trade on Wednesday, in an apparent response to the controversy. The stock climbed 5 per cent to ₹384.50 – its upper circuit limit as well as 52-week high – on the BSE after beginning the trade on a positive note. The company’s market capitalisation climbed ₹117.99 crore to ₹2,478.92 crore on the BSE.

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