August 23, 2022: The Gautam Adani-led Adani Group acquires a 100 per cent stake in Vishvapradhan Commercial Private Limited (VCPL).
VCPL owned convertible debentures (in the form of warrants) in Radhika Roy Prannoy Roy (RRPR) Holding Pvt Ltd, which in turn owned 29.18 per cent stake in NDTV Ltd. So with the VCPL purchase, the Adani Group indirectly acquired these warrants which would give it a 29.18 per cent stake in NDTV Ltd on conversion.
In August again, VCPL notified RRPR Holding of its intention to convert these warrants (issued in 2009) into equity shares, giving the firm 99.5 per cent control. With these shares of RRPL Holding, Adani Group-controlled VCPL was entitled to 29.18 per cent stake in NDTV Ltd.
Armed with 29.18 per cent indirect stake in NDTV Ltd, Adani Group launched an open offer (under Sebi norms) to acquire an additional 26 per cent stake in the Delhi-based news channel on November 22. The open offer will close on December 5 this year.
What is an open offer?
According to the SEBI (Substantial Acquisition of Shares and Takeovers) Rules, an open offer is an offer made by the acquirer to the shareholders of the target company inviting them to tender their shares in the target company at a particular price. The primary purpose of an open offer is to provide an exit option to the shareholders of the target company on account of the change in control or substantial acquisition of shares, occurring in the target company.
So, in the case of NDTV, as Adani Group has emerged as a large shareholder with 29.18 per cent shareholding and is likely to change the control structure of the company, it has to make an open offer to buy another 26 per cent stake so that minority shareholders willing to exit the company may tender their shares.
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What happens after the open offer?
If the Adanis manage to get the required 26 per cent stake, the group’s total stake will go up to 55.18 per cent, enabling it to take management control of the target company (NDTV). The acquirer will be able to bring in their own key management persons. If the Adanis fail to get a 50 per cent stake, they have the option to buy shares from other institutional investors. The Adanis may have to raise the offer price to get the required majority.
Is there scope for a counter offer by the Roys?
The Roys have the option to launch a counter offer to the open offer made by the Adanis at a higher price. Such an option depends on the financial muscle of the Roys. However, as they were unable to repay the loan taken from VCPL, it remains to be seen whether they will launch a counter offer. In any case, Adani can revise its original offer at a higher price and again counter the Roys.
Sounds like an interesting deal. Very well and easily explained . Thanks!
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