Adani group and NDTV seek SEBI clarification on stake sale

Just a day after Adani Media bought 29.18% stake in NDTV post buying a stake in VCPL and then exercising warrants, there was a furore raised by the NDTV promoters, Prannoy and Radhika Roy. The NDTV promoters were of the view that the stake had been purchased by Adani group without informing the promoters or the company in the process. The promoters of NDTV also raised questions about the feasibility of transferring these shares to Adani when the current promoters were under a capital market ban.

First a quick background about the ban on NDTV promoters. In its order dated 27th November 2020, the regulator SEBI had restrained the NDTV founders (Prannoy Roy and Radhika Roy) from buying, selling or otherwise dealing in securities, directly or indirectly, for a period of two years. This ban would be in effect till 26th November 2022. The 29.18% shares are held by RRPR (Radhika Roy Prannoy Roy) holdings Private Ltd, which had been pledged against the loan. NDTV contention was the transfer was not legally tenable.

Both, the promoters of NDTV and the Adani group have sought clarification from SEBI on this subject on whether the transfer of shares was really tenable since the promoters were under ban. While the final SEBI decision is pending, the internal reports suggest that since the deal for allotment of warrants was taken much before the ban on the NDTV promoters, that should supersede. Also, RRPR Holdings is a separate legal entity and this is not a voluntary transfer / sale of shares but merely a transfer by other party exercise of contract.

The stakes are huge in this game. NDTV had actually got a loan of Rs450 crore from Vishvapradhan Commercial (VCPL) in 2009 and there was also the clause that if the loan was not repaid then VCPL would have the right to convert the warrants into a 99.5% stake in RRPR Holdings. This would effectively give them 29.18% stake in NDTV. VCPL did not do anything with the warrants for over 13 years and it was only recently after the Adani group acquired VCPL that they decided to exercise the warrants and convert the same to shares.

One argument has been that the Rs450 crore loan in 2009 was actually a stake sale disguised as a loan. When Adani acquired VCPL, they got unfettered rights to the warrants held by VCPL, which eventually resulted in this conversion into NDTV shares. Legal experts are of the view that Adani group may have an upper hand in this entire episode as the NDTV promoters cannot use a ban as a pretext for not transferring shares. Also, the issues are more technical and NDTV always knew the outcome of not repaying the loan.

For now, the final word from SEBI is awaited with both the NDTV promoters and VCPL having written to SEBI seeking clarifications. For now, the Adani group sounds quite confident that it is on a firm wicket with respect to the deal.