Gautam Adani is the richest man in India. On Tuesday, he announced plans to buy a majority stake in New Delhi Television (NDTV), India's most influential media outlet, for his company. His announcement attracted the most attention in the news industry. Because the share purchase transaction is done in a secret manner.
Thus, the Adani family-controlled firm plans to acquire NDTV according to a timetable drawn up by lawyers, a Reuters analysis said.
VCPL company in question
Adani Group plans to buy majority stake in NDTV in two phases. And at the center of this plan was the little-known Vishwapradhan Commercial Private Limited (VCPL), founded in 2008.
More than a decade ago, NDTV founders Radhika and Prannoy Roy took a loan of Rs 400 crore ($50 million) from VCPL. In return, warrants were issued on behalf of the company owning 29.18 percent of the news group.
According to the agreement, VCPL gets the right to buy these shares at any time. Adani Group said on Tuesday that it has acquired VCPL. At the same time, the company has exercised its rights, including the provision of 29.18 percent of these shares.
NDTV reported that VCPL, now owned by Adani Group, has been given two days to transfer these shares.
NDTV issued a statement hours after the Adani Group's announcement. It said the Adani group did this without NDTV's consent. An internal NDTV document called Adani's move "completely unexpected".
The company is in the process of evaluating next steps, many of which involve regulatory and legal processes, the document also said.
open offer
As per India's capital markets regulations, the Adani Group can now make an open offer to buy at least another 26 per cent stake from existing shareholders, with indirect ownership of more than 25 per cent.
Advising on the plan, the Adani Group said the price of each share of NDTV in the open offer would be Rs 294. In all, there are plans to invest 62 million dollars. If that happens, 55.18 percent of this popular news network will go to Adani Group.
On Tuesday, the price of each share of NDTV stood at Rs 369.75. Accordingly, Adani has offered an unusually low price of 20.5 percent. However, this jump in the share price of NDTV happened only last month.
The founders were not in the handover discussion
A day before Adani Group's plans were made public, a stock exchange document came to light. In this, NDTV said, the two founders are not in talks with any organization to change ownership or swap their shares in NDTV.
Internal documents say that if the Adani Group venture is successful, the two founders will hold only 32 percent of NDTV.
What's in store for NDTV?
NDTV, however, says that the share swap initiative was taken without their consent. But speaking to Reuters on Wednesday, four lawyers said the Adani group is within its legal rights so far in the deal process. In this case, NDTV has limited options.
An Indian firm that provides legal services on mergers and acquisitions deals said the founders could try to block Adani Group's efforts by alleging breach of contract and go to court to seek redress.
Another lawyer said that since the founders gave warrants to VCPL a few years ago, NDTV should have kept in mind that such a time might come. Because there is always a possibility that a company may acquire shares as per this agreement.
Owners now have an option. That is to make its own open offer at a higher price in an attempt to increase its share.
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