At the heart of Adani Enterprises’ NDTV takeover is a Rs 403.85 crore loan.
Add to that Adani’s last-minute acquisition of Vishvapradhan Commercial Private Limited (VPCL), the company which lent the money to NDTV's promoting entity Radhika and Prannoy Roy Private Limited (RRPR), and what ensues is:
"A calculated move” designed to acquire one of the last few media houses critical of the Narendra Modi-led government, according to Siddharth Mody, corporate law expert and partner at Desai & Diwanji.
“If I were to look at the sequence of events in which the deal happened, I am inclined to say that Adani’s takeover of NDTV was a calculated move,” Mody told The Quint.
In an announcement that created ripples across the country, Adani Enterprises on Tuesday, 23 August, declared that it will acquire a 29.18 percent stake in the NDTV group through its subsidiary company VPCL.
Interestingly, Adani had acquired VPCL himself, shortly before he made the NDTV takeover announcement. The company, until then, was indirectly owned by Mukesh Ambani-led Reliance Enterprises.
Why was VPCL passed on? What is the history of the loan that led NDTV here? Is there anything at all that the media house can do to stop the takeover? And, how much of this is “without consent?”
First, the Money Trail
In 2009, RRPR, an entity that held 29 percent shares of NDTV, took an unsecured loan of Rs 403.85 crore from VPCL.
VPCL, in turn, borrowed the money from Shinano Enterprises in the form of another unsecured loan, the same financial year.
Keeping the chain intact, Shinano got the money from Reliance Industrial Investments and Holdings Limited, part of the Mukesh-Ambani Reliance Group.
Can the Roys Repay the Loan now? Or is it Too Late?
Yes and no.
“They could offer to pay it back, but in this case, Adani holds discretionary rights, which means that he gets to decide if he wants to take the money or retain equity,” senior business journalist, Sajeet Manghat, said.
“So, if I were Adani, I wouldn’t agree to it. He acquired VPCL, and then immediately staked claim to RRPR and NDTV. It is obvious that he is after the company and not the money,” Mody added.
'All NDTV is Doing is Buying Time'
In an attempt to counter the offer, NDTV, for its own part, revealed on the night of 24 August that VPCL’s takeover of RRPR will require a nod from SEBI.
SEBI, NDTV said, had imposed a 2-year freeze until 27 November 2022 on their access to securities markets in any manner “whatsoever,” thereby requiring them to pause the transaction until they were given a go-ahead.
“Even if this adds up and turns out to be true – the takeover will still happen in November, three months from now. There’s no stopping that. All the Roys are doing, is buying time,” Manghat said.
The Only Thing that can Perhaps Help Is…
The only way the Roys can get out of this is to finds loopholes with the way Adani acquired VPCL.
Siddharth Mody, for instance has questions about the timing of the purchase of VPCL.
“In what seems like a hurried takeover, we need to ask if Adani Enterprises followed due procedure while acquiring VPCL. There have to be resolutions and approvals even for a private company. If any of that was violated, then NDTV can challenge the takeover,” he added.
Is Ambani and RIL Involved Too?
It was. But not any more. Since AMG Media Networks Limited, a wholly owned subsidiary of Adani Enterprises, bought 100% of the equity stakes in VPCL for Rs 113.74 crore on the same day as its NDTV announcement.
Here’s the ownership breakdown at the time of transaction in 2009:
Vishvapradhan was owned by Shinano
Shinano was co-owned by Teesta Retail Private Limited
Teesta was wholly owned by Reliance Industrial Investments and Holdings Limited
In 2012, however, VPCL’s ownership was shuffled around.
The new owners were Nextwave Televenture Private Limited and Skyblue Buildwell Private Limited – companies linked to Mahendra Nahata, a director at Reliance Jio Infocomm Limited, a subsidiary of Reliance Industries Limited.
Statements filed by Vishvapradhan with the Ministry of Corporate Affairs this year reveal that it was owned entirely by Nextwave Televenture – until the Adani group got a hold of it on Tuesday.
Interestingly, between 2009 and now, VPCL, indirectly owned by RIL, chose not to exercise their option to convert the loan into equity.
“Although there is no clarity on it, this is exactly what needs to be questioned,” Mody said.
“Why did he wait for so long? If I was VPCL’s legal advisor, I would say that even before Adani took over, it had the right to acquire RRPR, without any action,” he added.
Can NDTV Oppose Adani Media's Open Offer Plan?
The open offer to buy out an additional 26 percent of NDTV's shares is Adani’s "mandatory legal right,” Mody confirmed to The Quint.
Whenever an enterprise acquires more than 25 percent of the shares or voting rights in another company, it has to extend an open offer seeking 26% additional stake, according to SEBI’s takeover regulations.
In NDTV’s case, since Adani Enterprises is set to acquire 29.1 percent of the company through RRPR, its open offer is legally valid.
“There is no way for NDTV to avoid this,” Mody added.
Crucial to understanding this is that the open offer is not for the Roys but for NDTV’s minority stakeholders.
“And, if these stakeholders are in close alliance with Adani, there’s a very good chance that they will offer up their shares to him,” he said.
Are the Minority Shareholders Connected to Adani?
So far, two of NDTV's shareholders – indirectly linked to Adani – have come to the fore: LTS Investment Fund (9.75% in NDTV) and Vikasa India EIF I Fund which owns 4.42% stake in the media house.
How are they connected?
Mauritius-based LTS industries, for instance, has an investment worth 18,916.7 crore in four of Adani’s companies, according to The Indian Express:
> 1.69 percent in Adani Enterprises
> 1.63 percent in Adani Transmission
> 1.09 percent in Adani Power
> 1.27 percent in Adani Total Gas
“So if Adani reaches out to them, they could even offer up their shares at a discount,” Siddharth Mody told The Quint.
‘Acquired Without Discussion Consent or Notice’: NDTV
Following Tuesday’s takeover, NDTV alleged that the move had come without “notice.”
"The NDTV founders and the Company would like to make it clear that this exercise of rights by VPCL was executed without any input from, conversation with, or consent of the NDTV founders," the statement read.
Was Adani Legally Obligated to Serve Notice?
Although issuing a notice is good business practice, Adani Enterprises is not legally obligated to issue a notice if the terms of the loan agreement don’t warrant it, Principal Associate at corporate law firm Khaitan & Co, Puja Singh explained.
In fact, the terms of the loan agreement, Caravan reported in 2015, were such that Vishvapradhan, could convert it into 99.9% of the shares in Radhika Roy-Prannoy Roy Private Limited “at any time during the tenure of the loan or thereafter without requiring any further act or deed on the part of the lender.”
“Even if we were to consider that the terms were such that the loan would not get converted automatically, the market practice is that a notice has to be given to RRPR, not to its subsidiary NDTV,” Singh said.