Sebi sees no bar in transfer of NDTV shares to Adani

Adani may approach Sebi to facilitate share allotment. Photo: Mint
Adani may approach Sebi to facilitate share allotment. Photo: Mint


  • NDTV has pushed its annual general meeting for the year to March by a week to 27 September without assigning a reason

MUMBAI : The Securities and Exchange Board of India (Sebi) has in internal consultations concluded that there is no bar on RRPR Holding Ltd, a promoter entity of news broadcaster New Delhi Television Ltd (NDTV), from allotting shares to Adani Group, three people with direct knowledge of the regulator’s thinking said.

“An internal note has been put by the corporate finance department in consultation with the legal department at the regulator clarifying that there is no bar on RRPR Holding that should prevent it from allocating shares," said the first of the three people cited above.

Sebi’s stance, arrived at in anticipation of a likely reference of the matter to the regulator, is likely to make it easier for the Gautam Adani-led conglomerate in its battle for control of NDTV, with promoters Radhika Roy and Prannoy Roy.

In a surprise move on 23 August, the infrastructure giant indirectly acquired a 29.18% stake in the broadcaster by purchasing Vishvapradhan Commercial Pvt Ltd (VCPL), which owned convertible debentures in RRPR. Adani Group also offered to buy 26% more from the open market, as mandated by law.

NDTV pushed back against the acquisition, claiming that a prior regulatory nod was needed for the transfer of shares as Sebi barred its founders from dealing in shares for two years till 26 November. However, Adani Group dismissed the contention, countering the owners of NDTV do not need any such approval. VCPL acquired the debentures in FY10 against a 404 crore loan extended to the promoter holding company. According to the acquisition notice, NDTV was required to allot the shares to VCPL by 25 August. No transfer of shares has taken place.

An email query sent to the regulator seeking comments was not answered till press time.

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Adani Group may approach the regulator to facilitate share allotment, said the second person. “If shares are still not allotted, Adani may have to opt for arbitration to enforce the agreement," this person said.

“Any dispute between the parties on or relating to the matters set out in this agreement shall be referred to binding arbitration under the Arbitration and Conciliation Act, 1996. The arbitration proceedings shall take place in Mumbai," said the loan agreement signed between RRPR and VCPL. A copy of the full loan agreement has been reviewed by Mint. An email sent to a spokesperson of the Adani group, as well as a text query sent to the CEO of NDTV, were not answered immediately.

Sebi’s internal note has been drafted by analyzing the loan agreements, its orders, Securities Appellate Tribunal (SAT) orders and directions passed by the Supreme Court against NDTV and its promoters in a related case. In addition, Sebi analyzed previous precedents where pledged shares were kept outside the ambit of a Sebi ban, said the third person.

“Sebi’s internal note agrees with Adani’s point of view. The ban pertains to Roys and not RRPR, the holding company. There are precedents of pledged shares not being a part of securities market ban," said the second of the two people cited above.

According to the loan agreement, the pledge predates the Sebi ban. “The borrower shall issue a 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," said the loan agreement.

RRPR signed two loan agreements with VCPL. The agreement on 21 July 2009 entitled VCPL to acquire a 26% stake against a loan of 350 crore on the exercise of the warrants. A second agreement with the same terms and conditions was signed in January 2010, which entitled VCPL to buy an additional 4% against a loan of 53.85 crore if warrants are exercised. Meanwhile, NDTV has pushed its annual general meeting for the year to March by a week to 27 September without assigning a reason.

In the case of shares pledged by promoters of Parsvnath Developers Ltd in October 2016, the regulator issued a no-objection on the release of the pledge on shares. These shares were stuck due to a regulatory ban against the lender First Financial Services Ltd. Even in that case, Sebi ruled that the ban was not on the pledged shares. In addition, the Roys have filed an appeal against the Sebi order of November 2020. On 15 February 2021, SAT passed an interim direction asking Roys to deposit half of the 27 crore penalty imposed on them. The matter went to the Supreme Court, which directed SAT to hear the appeals without insisting on any deposit amount. SAT will hear the appeal on 27 September.

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