Though NDTV has given no indication of its future course of action, the endgame seems near.
Vishvapradhan Commercial Private Ltd (VCPL), which holds a 29.18% stake in NDTV and was bought by the Adani Group last week, has had an interesting ownership history — from Reliance Industries to Mahendra Nahata to Infotel group’s Surendra Lunia, and now the Adanis.Within a few months of the first change of ownership in 2010, RIL bought Infotel Broadband from Nahata to re-enter the telecom business. And Lunia, who bought VCPL in 2012, was earlier the chief financial officer of the Nahata group’s HFCL Infotel, leading many to observe that some mergers and acquisitions in India Inc happen within very close-knit groups of people. In that sense, the sudden entry of Adanis is possibly an exception.
The two companies — Eminent Networks Pvt Ltd and Nextwave Televentures Pvt Ltd — from whom Adani bought VCPL were incorporated in 2008 and 2010, respectively. Both have an identical authorised share capital and paid-up capital of `10 lakh each. Eminent Networks is “involved in telecommunications (production of radio and television programmes, whether or not combined with broadcasting).”VCPL, which was incorporated in 2008, owned convertible debentures (warrants that provide for the conversion of debt to equity) in RRPR Holding Pvt Ltd (named after promoters Radhika Roy and Prannoy Roy) that in turn owned 29.18% of NDTV is a wholly-owned subsidiary of AMG Media Networks, the media arm of Adani Enterprises. It had acquired the debentures in 2009-10 in return for a loan amounting to `404 crore it extended to the promoter holding company.
Interestingly, the loan given by VCPL had come under the glare of the Securities and Exchange Board of India (Sebi) in 2018 when it termed it a ploy to “gain indirect control of up to 52% stake through a convertible loan of `350 crore in 2008 sourced from a subsidiary of RIL”.Though the Securities Appellate Tribunal quashed the order later, Sebi’s report had questioned the motive in entering into the loan agreement with the NDTV promoters. While the Sebi order did not get into details of VCPL’s ownership structure, it observed that the company had a revenue of only `60,000 in FY17 and more than `400 crore in long-term loans and advances. Sebi had said it was clear that VCPL did “neither have the history of advancing such loans, nor do they appear to have had the financial wherewithal to advance loans on such liberal terms”.
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Roys obviously had no option but to take the loan from VCPL. The NDTV promoters had made an open offer in 2008, and had taken a loan of `540 crore from Indiabulls to finance that. To repay this loan, another loan of `375 crore was taken from ICICI Bank, which in turn was repaid in 2009 by taking `350 crore from VCPL on July 21, 2009. The source of this loan was RIL, which routed the money to VCPL through a subsidiary.
The terms of this loan, however, were quite extraordinary. VCPL did not carry any interest rate while the loan taken from ICICI Bank carried an interest rate of 19% per annum. The Roys were also required to divest a significant chunk of their personal stock in NDTV and transfer it to RRPR, taking its total shareholding from 15% to 26% of the company. Then, control of RRPR was effectively handed over to VCPL.
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The loan agreement had a unique provision that “over the next 3 to 5 years, the borrower and the lender will look for a ‘stable’ and ‘reliable’ buyer of RRPR, who will maintain the brand and the credibility of NDTV”.The Roys control 32.2% of shares in NDTV, while the public shareholders own 38.55%. The company posted revenues of `421 crore and a net profit of ?85 crore in the year ended March 2022.Though NDTV had managed to stave off the open offer mandate given by Sebi after taking the loan in 2009-10, it has now come back to haunt the Roys.
Though NDTV has given no indication of its future course of action, the endgame seems near. The Adanis have already announced that it would give an open offer to shareholders to buy another 26% as per India’s securities law, and legal experts say it could be an uphill task for the Roys from here on.
