New Delhi: With Adani Group Launching a hostile takeover bid for NDTV, legal experts on Wednesday said the terms on which convertible warrants were issued back in 2009-10 would be important and any dispute would be decided on the terms of the contract. On Tuesday, the Adani Group announced that it has acquired 29.18 per cent stake in NDTV and will initiate an open offer to buy an additional 26 per cent stake in the company.
The key element behind the takeover bid is an unpaid loan taken by RRPR Holding Private Limited, the promoter arm of NDTV, from Vishwapradhan Commercial Private Limited (VCPL). The unit had taken a loan of Rs 403.85 crore in 2009-10 and a warrant was issued against this amount by RRPR. With the warrant, VCPL was empowered to convert the 99.9 per cent stake in RRPR to them in case the loan is repaid.
The Adani Group firm first acquired VCPL from its new owner and exercised the option to convert the unpaid debt into a 29.18 per cent stake in the news channel company. Subsequently, it made an open offer of Rs 493 crore to buy an additional 26 per cent stake from the public in line with the country’s takeover norms.
According to some legal experts, the terms on which the warrants were issued would be significant as the promoters of New Delhi Television Limited (NDTV) have claimed that they were completely unaware of the takeover till Tuesday, and it was done without them. . consent or discussion.
Ravi Kumar, partner, IndusLaw, said that usually the clause for conversion of warrants does not require any prior intimation or consent from the issuing company. “If such things are part of business understanding, they need to be explicitly set out as part of the conditions for the conversion of the warrant.”
“So it really depends on the contract there. And any dispute will be decided based on the terms,” he said.
He said NDTV founders Prannoy Roy and Radhika Roy could seek any remedy, they would have to convince the courts that the warrant was not exercised on the basis of the conditions.
“… it may also go on the basis whether the warrant conversion would require prior approval of the Ministry of Information and Broadcasting,” he said.
According to legal experts, the Adani Group’s public announcement and open offer are within the purview of the law. However, if it is challenged by the promoters of NDTV, there is a possibility of a protracted legal battle.
Pravin Raju, partner, Spice Route Legal, said the latest development is a classic repeat of the hostile takeover of Network 18 by Reliance in 2014.
“If the warrants issued to VCPL by RRPR Holdings Private Limited are convertible into equity at the option of VCPL, then the public announcement and open offer by VCPL is subject to the law,” he said.
Legal experts said the need for any consultation or concurrence with the promoters would arise only if the loan agreement with VCPL required a contract to do so.
Shubik Dasgupta, Partner, Pioneer Legal said the mechanism of the Adani Group buyout is clearly well thought out. “The terms of such warrant shall determine whether conversion is permissible”.
He also said that if challenged, there could be a protracted legal battle.
Khushboo Jain, a lawyer in the Supreme Court and partner of law firm Arch Legal, said the question of consent does not arise as it is the performance of an already existing contract.
The key element behind the takeover bid is an unpaid loan taken by RRPR Holding Private Limited, the promoter arm of NDTV, from Vishwapradhan Commercial Private Limited (VCPL). The unit had taken a loan of Rs 403.85 crore in 2009-10 and a warrant was issued against this amount by RRPR. With the warrant, VCPL was empowered to convert the 99.9 per cent stake in RRPR to them in case the loan is repaid.
The Adani Group firm first acquired VCPL from its new owner and exercised the option to convert the unpaid debt into a 29.18 per cent stake in the news channel company. Subsequently, it made an open offer of Rs 493 crore to buy an additional 26 per cent stake from the public in line with the country’s takeover norms.
According to some legal experts, the terms on which the warrants were issued would be significant as the promoters of New Delhi Television Limited (NDTV) have claimed that they were completely unaware of the takeover till Tuesday, and it was done without them. . consent or discussion.
Ravi Kumar, partner, IndusLaw, said that usually the clause for conversion of warrants does not require any prior intimation or consent from the issuing company. “If such things are part of business understanding, they need to be explicitly set out as part of the conditions for the conversion of the warrant.”
“So it really depends on the contract there. And any dispute will be decided based on the terms,” he said.
He said NDTV founders Prannoy Roy and Radhika Roy could seek any remedy, they would have to convince the courts that the warrant was not exercised on the basis of the conditions.
“… it may also go on the basis whether the warrant conversion would require prior approval of the Ministry of Information and Broadcasting,” he said.
According to legal experts, the Adani Group’s public announcement and open offer are within the purview of the law. However, if it is challenged by the promoters of NDTV, there is a possibility of a protracted legal battle.
Pravin Raju, partner, Spice Route Legal, said the latest development is a classic repeat of the hostile takeover of Network 18 by Reliance in 2014.
“If the warrants issued to VCPL by RRPR Holdings Private Limited are convertible into equity at the option of VCPL, then the public announcement and open offer by VCPL is subject to the law,” he said.
Legal experts said the need for any consultation or concurrence with the promoters would arise only if the loan agreement with VCPL required a contract to do so.
Shubik Dasgupta, Partner, Pioneer Legal said the mechanism of the Adani Group buyout is clearly well thought out. “The terms of such warrant shall determine whether conversion is permissible”.
He also said that if challenged, there could be a protracted legal battle.
Khushboo Jain, a lawyer in the Supreme Court and partner of law firm Arch Legal, said the question of consent does not arise as it is the performance of an already existing contract.