Sebi restraints not applicable on NDTV promoter company: Adani

“RRPR is not a party to the Sebi (Securities and Exchange Board of India) order dated 27th November 2020,” Adani Enterprises said in a regulatory filing on Friday, a day after NDTV said in a stock exchange disclosure that Radhika and Prannoy Roy were barred by a Sebi order from dealing in securities for two years till November 26, 2022.

“Consequently, the restraints as pointed out by RRPR in paragraphs 111(b) and 112 of the Sebi order do not apply to RRPR. The warrant exercise notice has been issued by VCPL (Vishvapradhan Commercial Pvt Ltd) under a contract which is binding on RRPR. RRPR is therefore obligated to comply with its contractual obligations,” said Adani Enterprises.

The development came days after Adani Group, owned by billionaire Gautam Adani, said on Tuesday that its media unit was set to buy a majority stake in NDTV.

The genesis of the takeover bid lies in an unpaid loan taken by RRPR Holding from VCPL.

RRPR Holding had taken a loan of ₹403.85 crore from VCPL in 2009-10 and against this amount, it had issued warrants, giving VCPL the right to convert them into a 99.9% stake in the company in case the loan was not repaid.

Adani Group had acquired VCPL from its owner and exercised the option to convert unpaid debt into a 29.18% stake in the news channel company. Subsequently, it made a ₹493 crore open offer to buy an additional 26% stake from the public as per the Sebi’s takeover norms.

“As per proviso to section 58(2) of the Companies Act, the relationship between Vishvapradhan and RRPR is governed by a contract,” said Ashish K Singh, managing partner of law firm Capstone Legal. “NDTV has limited options for restraining Adani from acquiring these shares as no concrete reasons have been given and admittedly consideration was received a decade ago in exchange of warrants that allowed Vishvapradhan to buy a stake in the news group at any time.”

If NDTV refuses to register the transfer of shares, Adani Enterprises can approach the National Company Law Tribunal (NCLT) in appeal under section 58 of the Companies Act, said Singh.

Nishith Dhruva, managing partner at law firm MDP & Partners, said the warrants are being enforced by the lenders against the loan given to the founders. Therefore, he said, the founders are bound to issue the equity against the warrants, which are independent of any regulatory restrictions, unless the founders obtain a stay from the appropriate court against the lenders from enforcing the warrants.

“Adani may not need the approval of the regulators as contended by the promoters of NDTV. This could be more of a tactic to delay the transaction, since the restrictions imposed by Sebi on the promoters would not necessarily extend to the other unlisted entity,” said Ketan Mukhija, partner at law firm Link Legal.

“The one thing that might pose an obstacle in this is the terms of warrants that are proposed to be converted,” said Mukhija. “If the conversions are not saddled with any material restrictions, it should be a smooth ride for Adani. However, knowing the political sensitivities around this dynamic, the NDTV promoters are likely to take this up in a legal battle.”

Besides, NDTV can seek to bring in a buyer of its choice, according to Akil Hirani, managing partner of Majmudar & Partners. “NDTV can adopt the classic takeover defence of bringing in a white knight (a rival buyer with deep pockets), who can counter and pay a price higher than that offered by the acquirer,” he said.