Adani Closes In On NDTV Takeover: Unless Roys Have A Secret Ace Up Their Sleeve, End Game In Sight As SEBI Approves Open Offer

NDTV Promoters Radhika Roy and Prannoy Roy might end up ceding control of their media company to the Adani Group. 

NDTV’s shares hit the 5 per cent upper circuit on Tuesday (15 November) after the Securities and Exchange Board of India (SEBI) approved the Adani Group’s open offer to buy an additional 26 per cent stake in NDTV.

How did NDTV’s Troubles Begin?

The seeds of NDTV’s takeover were sowed in 2007 when the promoters wanted to buy a 7.73 per cent stake in their own company from GA Global Investments. However, the transaction triggered an open offer. 

An open offer is triggered when a shareholder who owns less than 25 per cent of the company decides to acquire 25 per cent or more of the company. The open offer allows shareholders who might not be happy with the possibility of a change in control to sell out and move on. 

During an open offer, the buyers are required to buy another 26 per cent stake in the company. 

The Roys had triggered an open offer with their purchase of an additional 7.73 per cent stake in NDTV but did not have the necessary cash to carry out the open offer transaction.

Hence, they approached Indiabulls Financial Services Limited to provide the cash to bail them out.

NDTV’s Financial Struggles

Indiabulls provided them with Rs 501 crores in cash to complete the balance transaction in exchange for NDTV shares as collateral. However, just a few months later, the subprime financial crisis sent global markets into a tailspin, and India was no exception.

The value of NDTV’s shares was nearly cut to a fourth during the turbulent period. 

When the value of the collateral (NDTV shares) fell below the necessary limit, the Roys were forced to take loans from ICICI bank to pay back Indiabulls. The Rs 375 crores borrowed from ICICI, however, had an interest rate of 19 per cent. 

Again, the Roys pledged their personal holdings in NDTV, along with the shares held by their holding company RRPR Holdings Private Limited. 

The loan landed NDTV in controversy after Sunday Guardian alleged that the low collateral value did not justify the loan value. However, the publication was restrained from publishing or circulating the article.

Since the ICICI Bank debt was high-cost, the Roys borrowed money from Vishvapradhan Commerical Private Limited (VCPL). To do so, the promoters transferred a significant chunk of their holding to RRPR, and the VCPL lent Rs 403 crores, interest-free, to NDTV.

In return, VCPL gained the right to buy 99.99 per cent of RRPR’s equity through warrants, irrespective of whether the loan was repaid in full or not. 

Several other clauses ensured that VCPL’s stake wouldn’t be diluted. Effectively, VCPL could own nearly a third of NDTV at any point in time, even if NDTV repaid the entire debt during the stipulated period.

Surprisingly, VCPL itself had borrowed money to make the loan to NDTV. It had the entire borrowed money from Shinano Retail, a subsidiary of Reliance Industries.

VCPL was later bought out by new owners who were related to the company Himachal Futuristic Communications Limited. It is reported that the new owners of VCPL had ties with Reliance.

Adani to Roll Out Open Offer

Adani Group bought VCPL from its owners for Rs 113 crores and has decided to exercise the right to exercise the warrants and gain control of RRPR. 

Like several other large conglomerates, Adani Group has been interested in the media space for a while. In May, it bought a 49 per cent stake in Quintillion Media Private Limited through its subsidiary AMG Media Networks Limited.

As a result, the Adani Group came to own nearly a third (29 per cent) of NDTV. Since it would control more than 25 per cent of the company, it had to conduct an open offer, resulting in the Adani Group taking control of NDTV. 

Surprisingly, NDTV has an offshore institutional investor named LTS Investment Fund Limited, which owns 10 per cent of the company. LTS Investment Fund has invested solely in four of Adani Group’s listed companies. 

NDTV had earlier raised concerns about VCPL allegedly not taking permission from the Roys to exercise the warrants. It had also said that NDTV’s promoters were barred from the stock markets, making the transaction with RRPR non-compliant with rules.

However, SEBI’s go-ahead means that the regulator has found no merit in NDTV’s arguments.

The open offer is expected to be launched on 22 November. Nevertheless, whether NDTV or its promoters try to stop the deal from going through is yet to be seen.