Roys dig in, pose legal challenge to Gautam Adani’s bid for NDTV

The stage seems to be set for legal fight over the acquisition of a 100 per cent stake in Vishvapradhan Commercial Pvt Ltd (VCPL) by AMG Media Networks Ltd (AMNL), a wholly owned subsidiary of Adani Enterprises Ltd.

In an exchange filing on Thursday morning, NDTV said it had notified AMG Media that its founder-promoters Prannoy Roy and Radhika Roy have effectively been barred by India’s stock markets regulator from executing the transaction.

The NDTV statement claimed that in view of Securities and Exchange Board of India (SEBI) directions of November 27, 2020, the Roys have been “restrained from accessing the securities market, and prohibited from 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 2 years, which expires on November 26, 2022”.

As a consequence, the statement added, that “unless pending appeal proceedings were to successfully conclude, SEBI approval is necessary for the proposed acquirer to secure the 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”.

This filing comes after NDTV, on August 23, had informed the exchanges that RRPR Holding Ltd, which owns 29.18 per cent of NDTV, has been told to “transfer within two days all its equity shares to VCPL”. This deadline expires today.

What this implies is that NDTV has gone on record to publicly declare that it is unable to issue the shares to VCPL within the two day deadline set by the acquirer.

Also read: Adani Group to indirectly buy 29.18% stake in NDTV, launches open offer to acquire another 26%

Securities law experts say the development sets up the stage for what could be a protracted legal battle between the Roys and Gautam Adani’s fledgling media firm.

“As per Companies Act, warrants are to be converted into shares. However, in case any restrictions have been imposed by any regulator, then the company cannot issue shares without approval of the regulator. In this case, SEBI, as the regulator, has put restrictions on NDTV for two years. Hence the right to convert warrants into shares will be subject to regulatory directions. SEBI directives will override any shareholder agreements”, said Ved Jain, past President, ICAI.

Jain added that in view of the SEBI restrictions, “NDTV will not be able to comply with the demand for issuing shares against the warrants. The aggrieved party will have to approach the regulator (SEBI) and get the restrictions waived or relaxed.”

While an official response from AMG Media to NDTV’s latest statement is awaited, a source aware of the VCPL loan agreement and the terms of the warrants, say the Adani group can own RRPR Holding Pvt Ltd irrespective of what NDTV says.

Also read: Made aware of this exercise "only today": NDTV on its promoter-owned company's ownership change

“The lender can exercise ownership of RRPR Holding. The SAT (Securities Appellate Tribunal) order has upheld VCPL loan and its rights to own RRPR,” the source added.

Contesting the NDTV version, sources pointed out that the terms of the warrant of the 2009 loan deeds specify that “at the sole option of the lender, the warrant may be converted, into equity shares aggregating to 99.99 per cent of the fully diluted equity share capital at the time of conversion of the borrower, at any time during the tenure of the loan or thereafter, without requiring any further act or deed on the part of the lender”.

Further, in order to exercise its conversion option, “the lender has to issue a written notice to the borrower. Within two business days of the issuance of the conversion option notice, the borrower, upon on payment of the amount of par value of the equity shares by the lender, allot to the lender or any person nominated by the lender the number of equity shares specified in the conversion option notice.”

Sources added the terms specify the borrower (RRPR Holding) and the promoters are responsible to execute all documents, deeds and writings, and furnish all approvals and consents, as may be required in connection with the issue and conversion of the warrant into equity shares.

“NDTV promoters have already given away the rights in 2009 itself, much before the SEBI restrictions came into effect. AMG Media is not asking for transfer of NDTV shares – they are asking for delivery of RRPR Holding shares. Their argument is irrelevant. It is like hiding behind a fig-leaf,” the source added.    

Also read: NDTV says SEBI approval necessary for VCPL to secure RRPR stake

Also read: Adani's NDTV buyout: A saga with many twists and turns, 13 years in the making