Citing a November 27, 2020, SEBI order, NDTV Ltd told stock exchanges Thursday that Adani Group-owned Vishvapradhan Commercial Private Ltd (VCPL) will have to seek the market regulator’s approval before it acquires 99.5 per cent stake in RRPR Holding Pvt Ltd, which in turn holds 29.18 per cent shares in the television media company.
Security law experts, however, said the SEBI order may not be an obstacle. “This transaction does not entail a fresh sale or purchase of securities. Further, it is simply an execution of the arrangement that VCPL and RRPR entered in 2009 and 2010,” a source in the know of things told The Indian Express.
VCPL, an Adani Enterprises’ step-down subsidiary now, had given an interest-free loan of Rs 403.85 crore to RRPR Holding in 2009 and 2010, against which RRPR Holding had issued warrants to VCPL. The warrants entitled VCPL to convert them into a 99.9 per cent equity stake in RRPR. RRPR Holding owns 29.18 per cent in NDTV Ltd.
In the disclosure to the stock exchanges, NDTV said the SEBI order restrained the founder-promoters Prannoy Roy and Radhika Roy from accessing the securities market, and prohibited them from buying and selling securities, directly or indirectly for two years, which expires on November 26, 2022.
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Another source close to the developments said that neither did SEBI’s November 2020 order restrain RRPR from dealing in securities transactions nor did the NDTV disclosure Thursday explicitly mention RRPR cannot buy or sell securities. The source, however, acknowledged that material facts (VCPL ownership) had changed, and the deal eventually led to Adani acquiring 29.18 per cent stake in NDTV, a listed entity.
The Adani Group may await a clear SEBI nod or even wait for three months till November 26, 2022, when the ban on Roys will be lifted, so that the acquisition of RRPR and thereby its ownership of NDTV holding takes effect.
Legal experts contend that the conversion of warrants was a part of a decade-plus old transaction when a loan was given by the proposed acquirer – VCPL – and that this entity was now only exercising its rights to convert the warrants into equity.
“Ideally warrant conversion should not be an issue. The transaction here is by the entity and the restriction imposed by the regulator is on individuals, so both the issues are not connected. I don’t see an issue here,” said a top securities law expert.
“Regulatory approval is anyways required for transactions of this nature, as minority and other shareholder interests have to be also looked at and so there is nothing new to it. It is a procedure and the regulator will see if all the rules and procedures have been followed,” the expert said.