NDTV Ltd has told the stock exchanges that the entity called Vishvapradhan Commercial Private Ltd (VCPL) — which is now a subsidiary of the Adani Group — will have to get approval from the market regulator Securities and Exchange Board of India (SEBI) before it can acquire 99.5 per cent stake in RRPR Holding Pvt Ltd, a company that was owned by NDTV’s founders Prannoy Roy and Radhika Roy.
This has been interpreted to mean that the Adani Group cannot immediately become the owner of RRPR’s 29.18 per cent stake in NDTV Ltd, thus becoming a major shareholder in the company.
NDTV Ltd has cited a SEBI order from November 27, 2020. In its disclosure to the stock exchanges, NDTV has said that this order restrained the founder-promoters Prannoy Roy and Radhika Roy from accessing the securities market, and prohibited them from buying and selling securities, directly or indirectly for two years. This two-year period ends on November 26, 2022.
The SEBI order may not present a hurdle, security law experts told The Indian Express. That is because the present transaction does not entail a fresh sale or purchase of securities, they said. It is simply an execution of an arrangement that VCPL and RRPR had entered into back in 2009 and 2010.
Also, a source who is close to the developments said the disclosure by NDTV did not explicitly mention securities transactions related to RRPR, while acknowledging that material facts had changed, and the deal eventually led to Adani acquiring 29.18 per cent stake in NDTV.
What happened in 2009 and 2010 that set this chain of events into motion?
In 2009 and 2010, VCPL gave an interest-free loan of Rs 403.85 crore to RRPR Holding Pvt Ltd, a company owned by the Roys. Against this loan, RRPR issued warrants to VCPL, which entitled VCPL to convert them into a 99.9 per cent stake in RRPR.
Adani was not in the picture at the time. In order to extend the loan to RRPR, VCPL had raised funds from Reliance Strategic Ventures, a wholly-owned subsidiary of Mukesh Ambani-led Reliance Industries Ltd.
On Tuesday (August 23), the Adani Group announced that AMG Media Networks Ltd, a subsidiary of its flagship Adani Enterprises Ltd, had bought VCPL for Rs 113.75 crore.
In a statement to the stock exchanges, NDTV Ltd said: “Without any discussion with NDTV or its founder-promoters, a notice has been served upon them by VCPL, stating that it (VCPL) has exercised its rights to acquire 99.50% control of RRPR, the promoter-owned company that owns 29.18% of NDTV.”
Subsequent to this, the Adani Group announced an open offer for buying another 26 per cent stake in NDTV.
What did the SEBI order of 2020 say about market participation by the Roys?
The relevant paragraph in the order says: “The obligation of the Noticees (Prannoy Roy and Radhika Roy), in respect of settlement of securities, if any, purchased or sold in the cash segment of the recognized stock exchange(s), as existing on the date of this Order, can take place irrespective of the restraint/ prohibition imposed by this order only, in respect of pending unsettled transactions, if any.”
Legal experts contend that the conversion of warrants was a part of a decade-old transaction when a loan was given by the proposed acquirer — VCPL — and this entity was now merely exercising its rights to convert the warrants into equities.
“Ideally warrant conversion should not be an issue. The transaction here is by the entity and the restriction imposed by the regulator is on individuals, so both the issues are not connected. I don’t see an issue here,” a top securities law expert said.
Another expert said: “Regulatory approval is anyway required for transactions of this nature, as minority and other shareholder interests have to be also looked at, and so there is nothing new to it. It is a procedure and the regulator will see if all the rules and procedures have been followed.”
The current shareholding pattern of the company is as follows:
Prannoy Roy and Radhika Roy continue to hold 32.26 per cent stake in the company personally.
Since September 2020, four shareholders — who have interlinked directors — have cumulatively owned 7.11 per cent in NDTV. As of June 2022, GRD Securities owns 2.8 per cent, Adesh Broking owns 1.5 per cent, Drolia Agencies owns 1.48 per cent, and Confirm Realbuild owns 1.33 per cent stake.
Then there is LTS Investment Fund, which owns 9.75 per cent in NDTV. This fund also owns 1.69 per cent in Adani Enterprises and also in other group companies including Adani Power (1.09%), Adani Transmission (1.63%) and Adani Total Gas (1.27%).
If these two sets of investors sell their shares in the open offer made by Adani, it would take Adani Group’s shareholding in NDTV to over 46 per cent. Some other shareholders may also take up the offer.
However, the Adani Group’s current offer is significantly less than the NDTV stock’s market price, which was more than Rs 400 per share on August 25.