By: Supratim Mukherjee
Clash between Gautam Adani and Prannoy Roy still making headlines, weeks after the bid by the former to acquire the channel’s stake.
It was the 23rd of August when India's current richest man, Gautam Adani, unveiled his plans to acquire a majority stake in New Delhi Television (NDTV) (NDTV.NS). It was his stealthy approach in the execution of the transaction that drew the most attention in the news industry for weeks till date.
Thereafter, NDTV and Adani have locked horns with each other in public. The 24*7 news channel had claimed that there are certain legal prohibitions upon its founders that are letting them from transferring shares to the latter billionaire group.
NDTV is one of India's most popular news networks. It is known for its independent voice in India's rapidly polarising media landscape. Thus the takeover attempt has triggered concerns among journalists and politicians contemplating that a change of ownership could undermine the channel’s editorial integrity.
On the other hand, the Adani family went about with great planning for the takeover with NDTV’s futile attempts in resisting the same.
Background
A little-known Indian company, Vishvapradhan Commercial Private Limited (VCPL), founded in 2008, stole much of the spotlight from Adani’s takeover bid. Over a decade ago, NDTV founders Prannoy Roy and his wife, Radhika Roy, took 4 billion rupees ($50 million) in loans from VCPL and in exchange, issued warrants that allowed the latter to acquire a 29.18% stake in the newsgroup.
However, those warrants were convertible at any time. Thus, Adani Group claimed that it had acquired VCPL and exercised those rights, which should legally give them a stake in NDTV. Now, the clash spurred as the multimillionaire group stated that the takeover bid was made without their consent, while one of their memos referred to the move as an "entirely unexpected" one.
Shareholding patterns
As per Indian regulations, Adani Group's indirect control of a stake above 25% would imply that it must put forward an open offer to purchase at least 26% more from the existing shareholders in NDTV to give them an opportunity to exit. And that's exactly what the nation’s richest man did! Laying out its plan, the Adani Group said that the open offer would be at 294 rupees per NDTV share for a total consideration of up to $62 million. If this two-stage plan works, Adani Group would get a 55.18% share of the popular news network.
The pie chart represents the shareholding percentages in NDTV for different entities. As we can see, the majority of equity is owned by promoters which is 61% & 13% is available for public offerings. Some foreign banks also own equity instead of debt to keep the book value of share positively correlated to that of face value.
Director’s POV
Although the channel said that the move arose without their consent but four lawyers who spoke to Thompson Reuters said that Adani Group was well within their legal rights in the deal so far.
NDTV had said that it was given two days’ time to transfer the shares due to the Adani’s after they made the takeover bid. But as that deadline neared, NDTV threw a spanner in the works.
It disclosed on the 25th of August that its founders, the Roy duo, were currently prohibited from dealing in India's securities market due to a 2020 regulatory decision in a case of suspected insider trading of NDTV shares. According to the channel, the Roys' entity could not transfer the shares Adani was trying to secure.
This regulatory restriction is in place until November this year, and a lawyer said that NDTV's effort at best could "stall or slow down the process" of Adani's takeover.
But Adani, again on 26th August, called NDTV's arguments "baseless", saying that the latter is legally bound to immediately transfer the shares. Adani says the Roys' entity is not subject to the market regulator's trading restriction on the Roys themselves.
As we can see from the upper chart that since the dawn of NDTV it has given almost 750% returns to its shareholders & in the last financial year also it has generated 7.6X returns. The earnings per share is 12.85 Rs. and the ROCE is 42.22%.
Some lawyers have also told NDTV should have foreseen the situation as its founders had issued warrants to VCPL years ago and there was always a possibility that a company could execute them to acquire a stake. NDTV today is contesting rights that it gave away years ago.
Competition & road ahead
One option for the NDTV founders could be to attempt to make their own open offer at a higher price to the Adani Group and try to increase their stake and subsequently challenge the latter.
ZEE Entertainment’s WION being NDTV’s strongest competitor is facing viewership issues after a majority of its editors, along with Mrs. Palki Sharma Upadhyay, left the company. Network 18 Media is also trying to engage viewership from the tail of the competition. Other news channels such as CNN & Republic TV are ahead of them, but they are trying to cope up with them with their new programs being telecasted regularly.
In my opinion, this game-changing business deal is henceforth the talk of the town since August end. It's only a matter of two more months to see which way the wheels turn in favor of Forbes 2022 declared, the richest man, Gautam Adani, or the ever-producing news-on-its-own-terms channel, NDTV.
Good One!
Interesting!