NDTV takeover saga: A battle of unequals

Prannoy and Radhika Roy have their backs to the wall as the Adani group pushes through the doors at the news network. What are their options?

For a week now, the twists and turns in the NDTV takeover saga continue unabated. Clearly, the potboiler has everyone hooked. Especially since the dramatis personae include two of the country’s biggest industrialists, Mukesh Ambani and Gautam Adani, both known for their proximity to Prime Minister Narendra Modi, and Prannoy and Radhika Roy, the husband-and-wife team who founded NDTV and turned it into an iconic television and digital news brand.

Now, the question on everyone’s mind is: Will the Roys put up a fight? Or will they eventually make way for Mr Adani, bringing down the curtains on an incredible 38-year journey? If one were to stick to the facts in the public domain, the picture was unclear until this weekend.

As I write this column, however, the fog is starting to lift. The Roys have backtracked from the initial seemingly hardline position and written to the Securities and Exchange Board of India (Sebi) to ask whether the ban imposed on them allows them to convert the warrants into equity shares in RRPL, the promoter company of NDTV. In case Sebi clarifies that the ban may not affect this transaction between two unlisted companies, it could clear the way for the Adani Group to get their 29 per cent stake in NDTV. And then the game is over for the Roys for all practical purposes. After the warrant conversion, the Roys will still have a 32 per cent stake in NDTV. But the Adani Group could push for control through either the open-offer route or through open-market purchases.

So what options do the Roys have?

A legal fightback: It isn’t as if the Roys don’t have any legal options. An important consent clause has been violated in the 2009 loan agreement. In fact, in their first statement, within a couple of hours of the Adani Enterprises disclosure to the bourses, the Roys pointed out that neither were they kept informed nor was their consent sought before the ownership of VCPL changed from Mahendra Nahata to Mr Adani.

Under the Ministry of Information and Broadcasting (MIB) regulations, NDTV’s uplinking and downlinking licence was granted to the Roys because they hold nearly 61.45 per cent stake in NDTV. (Remember that no foreigner is allowed to hold more than 51 per cent in any news television channel.) If the Roys’ stake slips below 51 per cent, NDTV will no longer be compliant with the MIB guidelines. Unless of course, they sign a “single unit” agreement with Mr Adani, as was done between Reliance and Raghav Bahl in 2014, before Reliance took charge of Network18 and then initiated an open offer.

The wheels of the legal system though grind slowly and any legal battle, either in the high courts or the National Company Law Board Tribunal, could be protracted and costly. Taking on the powerful Adani Group with its huge resources presents monumental challenges.

Deal with the loan: Many have asked why the Roys weren’t able to pay back the interest-free loan of around Rs 403 crore to free their entire stake in RRPL of any encumbrances (amounting to 29 per cent in NDTV) by pledging their remaining 32 per cent stake in NDTV. Here’s the catch: Under the 2009 loan agreement, the exercisable warrants remain available indefinitely to VCPL, even after the loan is fully repaid. So even if the Roys had found a way to pledge their remaining shares —and in fact, even that option is not permissible under the same agreement —it wouldn’t have made any difference. So the most obvious question is, why did the Roys agree to such onerous conditions? The simple answer: After the global financial crisis, capital had completely dried up. Just before that crisis, like Mr Bahl’s Network18 Group, the Roys had a bloated structure, high debt and poor financials because of its failed diversification. And as first generation media entrepreneurs, they did not have access to large pools of capital of their own to maintain their stake at 51 per cent, as mandated by MIB regulations.

Reach an amicable solution: For the past few years, the Roys have been in the crosshairs of government agencies. They have been subjected to Central Bureau of Investigation and Enforcement Directorate raids, had their passports impounded and stopped from flying out for an event in the US. In June 2019, the market regulator barred them from the capital markets for two years and also from holding any board or management role at the company. However, the SAT later stayed this order.

In December 2020, they were hauled up by Sebi for not disclosing the loan —and fined Rs 27.5 crore for violating regulatory norms. Sebi argued that the loan agreements were structured in such a manner that the clauses on various matters pertaining to NDTV, which were material and price-sensitive information, were concealed from the minority shareholders.

The Roys fought all the way to the Supreme Court, which then directed them to appeal before the Securities Appellate Tribunal. The process is still on.
 

At 72, Prannoy Roy no longer has the stomach for a fight. And the only way the Roys could now bow out gracefully—without being seen to have capitulated —is to let Sebi clear the way for the Adani warrant conversion. They can then hammer out a deal to sell their remaining stake to the Adani Group, along with a bailout package for some of their veteran anchors. And if such a win-win deal fructifies, the couple could finally walk into the sunset.
 

The writer is co-founder at Founding Fuel