Mumbai: Adani Group has received a letter from New Delhi Television Ltd. stating that the group is unable to acquire a 99.5% stake in RRPR Holding Pvt. Ltd. due to Radhika and Prannoy Roy, the company's current owners, being prohibited by India's markets regulator from engaging in any securities transactions. This appears to be an effort to thwart the hostile takeover of New Delhi Television Ltd.
After claiming to have indirectly purchased a 29.18% stake in the broadcasting business by converting warrants held in RRPR Holding in lieu of a 4-billion-rupee loan, Adani Group launched an open offer to purchase up to 26% of NDTV on Tuesday. As of June 30, there were 61.45% of promoter shares in NDTV, of which RRPR Holding held 29.18% and Prannoy Roy and Radhika Roy individually owned about 32%.
NDTV appears to be saying that since Radhika and Prannoy Roy are no longer permitted to conduct any securities transactions, this prohibition also applies to all of the firms that these two promoters possess.
Since Radhika and Prannoy Roy currently own RRPR Holding, the acquisition vehicle for Adani, it is also included in the SEBI prohibition.
Since the SEBI restriction applies to RRPR Holding, it cannot issue new shares to replace the warrant held by Adani. If new shares cannot be given to Adani Group, the group cannot take control of RRPR, and consequently, cannot take control of NDTV.
The loan agreement does, in fact, include the following clause, which permits the lender to convert the loan into shares at any time:
"The Borrower (RRPR) shall issue a convertible warrant, convertible warrant, convertible into equity shares aggregating to 99.99% of the fully diluted share capital of the borrower at the time of conversion to the lender immediately upon execution of this agreement... At the sole option of the lender, the warrant may be converted into such number of equity shares at par aggregating to 99.99% of the fully diluted equity share capital at the time of conversion of the borrower (RRPR) at any time during the tenure of the loan or thereafter without requiring any further act or deed on the part of the lender."
If successful, this line of defence would give Adani Group two choices of either wait until November 26 to complete the transaction, or ask SEBI for special permission to acquire RRPR Holding, arguing that a ban on the Roys' trading cannot prevent the couple from fulfilling their legal obligations under a loan agreement.
Prannoy Roy and Radhika Roy were ordered by SEBI to disgorge illicit gains totaling more than 169.7 million rupees in 2020 after being found guilty of insider trading and receiving a two-year suspension from the securities market.
On the National Stock Exchange, shares of NDTV finished at 388.20 on Wednesday, up 5%.
