Adani recently became the third richest person in the world due to rapid expansion of his businesses. This included acquisitions of Ambuja Cements and ACC. He also gained wealth through investments in green energy like Adani Green. However, some experts are concerned about high leverage and debt used to fund growth. Adani recently acquired a majority stake in NDTV by exercising warrants held by its subsidiary VCPL. NDTV founders dispute this move and are exploring legal options to prevent losing control of the independent news network. The takeover raises questions about strategic intentions and impact on media diversity.

1. SM-7
Unit-2
Capital ,Managerial and Controlling Stake

2. Case #1 : The Fishy Story

3. About Gautam Adani
• Gautam Adani becomes world’s third richest person , first Asian

4. The Rise
• Adani, 60, has spent the past
few years expanding his coal-to-
ports conglomerate, venturing
into everything from data
centers to cement, media and
aluminium.
• The group now owns India’s
largest private-sector port and
airport operator, city-gas
distributor and coal mine.

5. The Rise
• Valuations notwithstanding,
Adani’s recent push into green
energy has been the biggest
contributor to his wealth gain.
• Shares of Adani Green Energy
have surged over 5,500% in the
past three years and at $40
billion, it has become the
group’s most valued company.

6. The Rise …
• In 2022 alone, Adani added $64.8 billion to his wealth
• Thanks to the following jewels in his crown
• Adani Enterprises
• Adani Green
• Adani Ports
• Adani Total Gas

7. The Sudden Rise….

8. Shopping Spree
• On April 22, 2022, Adani ports and Special Economic Zone (APSEZ)
acquired a 100% stake in India’s largest marine service company
Ocean Sparkle for Rs 1700 crores.
• Last year (2021) Adani Ports and Special Economic Zone (APSEZ)
acquired key stakes in Gangavaram Port.
• Adani groups acquired Ambuja Cements and ACC after raising funds
of $5.25 Billion from global banks in 2022.

9. Then A Report
• However, many experts raise concerns over the rapid expansion and
growth of Adani’s wealth.
• CreditSights in its reports mentioned that the Port-to-Power
conglomerate of Adani is “deeply leveraged”.
• CreditSights also claims that the Adani Group is investing heavily in
existing and emerging businesses by predominantly using debts.

10. More Reports
• Adani has built up an extraordinary fortune through a mix of
aggressive risk-taking, rapid debt accumulation and canny political
connections,” said James Crabtree, author of “The Billionaire Raj,” a
book about India’s wealthy and inequality.
• “His rapid rise over barely a decade to the summit of India and Asia’s
tycoon class represents the possibilities and rampant inequality of
India’s new Gilded Age.”

11. The Report
Some lawmakers and market
watchers have also raised concerns
over opaque shareholder structures
and a lack of analyst coverage at
Adani
Yet the shares have soared -- some
of them more than 1,000% since
2020, with valuations hitting 750
times earnings -- as the tycoon
focused on areas that Prime Minister
Narendra Modi deems crucial to
meeting India’s long-term goals.

12. Then This Happens

13. About
• NDTV was founded in 1984 by Prannoy Roy and Radhika Roy. It
currently operates two news channels and is known for being a
watchdog of democracy by fearlessly questioning those in power,
irrespective of which political party they belong to.
• As such, it has the reputation of being one of the few remaining
independent – and therefore credible – news outlets in India
• With a market capitalization of $310 million, NDTV reported 2021
revenues of $45 million.

15. Media Companies

16. Dominance in Media Sector
• Unlike the other major billionaire-led group in India, Mukesh
Ambani’s Reliance Industries, which has significant media holdings,
including digital ownership rights of IPL
• Adani’s media holdings are modest. AMNL was set up to be in “the
business of publishing, broadcasting, distributing and advertising,”
per a filing to the Bombay Stock Exchange.
• The first step in building the Adani media empire was the May
acquisition of a 49% stake in Quintillion Business Media, a digital
business news platform.

17. The official statement
• AMNL seeks to empower Indian citizens, consumers and those
interested in India, with information and knowledge. With its
leading position in news and its strong and diverse reach across
genres and geographies, NDTV is the most suitable broadcast and
digital platform to deliver on our vision.
• We look forward to strengthening NDTV’s leadership in news
delivery,” the statement added.

18. The most important Pie Chart …

19. The Heart of the Story - VCPL
we need to rewind the clock back to June 2008
NDTV raised a loan of Rs 540 crore from Indiabulls Financial Services Private
Limited. While incurring the loan, the Roys pledged their shareholding in
NDTV as security.
Barely four months later in October 2008, the Roys took another loan of Rs
375 crore from ICICI Bank to pay off the earlier loan disbursed by Indiabulls
Housing Finance.
This loan was doled out at an eye-popping rate of 19% per annum, and the
Roys encumbered their entire shareholding in NDTV to secure this loan.

20. The Heart of The Story …
• In July 2009, the NDTV promoters, once again, took a loan of Rs 350
crore from VCPL in order to repay the loan taken from ICICI Bank. This
loan was disbursed at zero interest rate. Subsequently, VCPL
advanced Rs 350 crore to RRPR holdings, which, rightfully, paid off
ICICI Bank.
• VCPL also advanced another loan of Rs 53.85 crore to NDTV
promoters.

21. The Bait
• An important term of the loan agreement was that RRPR was to issue
convertible warrants to VCPL which were convertible into equity
shares aggregating to 99.99% of equity share capital of RRPR.
Intriguingly, this conversion could be carried out at any time during
the tenure of the loan or thereafter.
• As long as the warrants weren’t exercised, the Roys were able to
continue leading their channel without any real threat of a takeover.

22. The Bait
• There are two other important clauses in the loan agreement :
• The loan agreement was tailored in a manner to protect the interests
of NDTV promoters.
• Essentially, one of the clauses states that VCPL and its affiliates cannot
purchase shares of NDTV which will increase their holding to more
than 26% in NDTV without the consent of the promoters.

23. Enter Reliance Industries
• Meanwhile, VCPL is a shell company which reportedly has had no
assets in the 14 years since its incorporation barring the RRPR
warrants it holds.
• The loan that VCPL disbursed to NDTV made its way through a chain
of transactions that trace their route back to Reliance Industries.
• VCPL’s loan to RRPR came from Shinano Retail private limited, a
wholly-owned subsidiary of Reliance.

24. Fall out of The Deal ( June 2019)
Sebi barred NDTV Ltd's three key promoters -- Prannoy Roy, Radhika
Roy and their holding firm RRPR from the capital markets for two years
and also restrained the two individuals from holding any board or top
management role at the company in this period.
termed as violation of various regulations by keeping minority
shareholders in the dark about three loan agreements.

25. Fall out of the Deal
• In its latest 51-page order, the Securities and Exchange Board of India
(Sebi) said all its directions, including debarment of RRPR, Prannoy
Roy and Radhika Roy from buying, selling or otherwise dealing
directly or indirectly in securities, or being associated with the
securities market, will come into effect immediately.
• Their existing holdings, including mutual fund units, will remain
frozen during the prohibition period, Sebi said.

26. Fall Out of The Deal
• A second loan agreement for Rs 53.85 crore was also signed with
VCPL a year later that provided for the promoters of NDTV allowing
the lender to indirectly acquire 30 per cent stake in the media
company through conversion of their warrants into equity shares of
RRPR Holdings.
• It was alleged that by concealing such material information from the
public shareholders for a period when the promoters were
themselves dealing in the company shares, they had committed a
fraud on the minority public shareholders.

27. Fall Out of The Deal
• Sebi said Roys have been the face of NDTV and the prime movers of
all its activities, while they were also actively running the day-to-day
management as Chairman and Managing Director (MD).
• Under the circumstances, they had "avowed duty to act in a fair and
transparent manner to protect the interest of their minority
shareholders and not to indulge in any fraudulent activity or any
activity detrimental to the interest of the shareholders of NDTV".

28. Fall Out of The Deal
• The regulator also accused them of having violated the Code of
Conduct of NDTV, which they were supposed to abide by as Chairman
and MD.
• All the entities have violated Prohibition of Insider Trading (PIT)
Regulations, Sebi said in three separate orders
• Sebi noted that Prannoy Roy and Radhika Roy together made a gain of
Rs 16.97 crore while indulging in insider trading in the shares of NDTV
while in possession of UPSI relating to the proposed reorganization of
the company.( Unpublished Price Sensitive Information )

29. Another OnHere is why Prannoy Roy and Radhika Roy were
stopped at the airport and were not allowed to leave the country
• The FIR against Prannoy and Radhika Roy of NDTV in the ICICI loan
fraud case (June 2017)
The crux of the issue in the ICICI case is that allegedly, Prannoy Roy and
Radhika Roy caused ICICI a loss of Rs. 48 crores, took unlawful favours
and had profit transferred to them.
ICICI allegedly also involved in the promoters of NDTV to transfer the
ownership of their news broadcasting company to a shell company. The
charges in the FIR also include the laundering of Rs. 403.85 crores in
order to create interest in favour of a benami party to gain illegal
control of NDTV.

30. The Steal Deal and entry of two more
companies …..
• AMG Media Network private limited acquired a 100% equity stake in
VCPL from Nextwave Televentures Private Limited and Eminent
Networks Private Limited,
• both of them being Nahata-linked companies,
( Mahendra Nahata , Director at Jio)

31. The Steal Deal
• NDTV operates three national news channels - English news channel
NDTV 24x7, Hindi news channel NDTV India and business news
channel NDTV Profit.
• It also has a strong online presence and remains one of the most
followed news handles on social media with more than 35 million
followers across various platforms.
• Adani said it bought VCPL for Rs 114 crore.
• Incorporated in 2008, VCPL was initially linked to Ambani's group but
its ownership was transferred to a firm run by an associate with links
to Delhi-based Nahata Group in 2012.

32. Check Mate ….
• Recall that when the Roys and RRPR raised a loan of Rs 350 crore and
Rs 53.85 crore from VCPL, they had given away convertible warrants
to VCPL.
• The Adani-acquired VCPL is now exercising these convertible
warrants.

33. More to This than the Eye Can see
• Why did VCPL agree to enter into a loss-making deal with Adani
Enterprises? VCPL originally gave a loan of Rs 403.85 crore to RRPR
and VCPL was acquired by Adani for a mere Rs 113.74 crore.
• Was Ambani’s aide forced to sell VCPL to Adani at a lower price?
Hopefully, more details will be uncovered in the coming days.

34. What's Coming …..
• The acquisition of RRPR by VCPL results in an indirect acquisition of
voting rights in excess of 25% equity shares of NDTV, which, in turn,
triggered an open offer by VCPL for NDTV shares.
• Will public shareholders respond to the open offer?
In August , shares of NDTV hit the upper circuit of 5% to scale new
heights and reach a 52-week high of Rs 384.50.

35. Cost To Adani
• Adani Enterprises will spend ₹492.81 crore to acquire an additional
26 per cent stake via an open offer from the public shareholders of
NDTV.

36. Whats Coming …
Raising the open offer price above the market rates is not the only way
for the Adani group to strengthen its holding in the broadcaster.
The Adani group can still scrounge up a stake of nearly 50% in NDTV,
helping it establish firm control over the company’s operations, by
striking deals with other bigger and institutional shareholders.
Out of these, there are two investors that have come into the public
eye – LTS Investment Fund (9.75%)
Vikasa India EIF I Fund which owns 4.42% stake.
Both funds have their own connections to the Adani Group.

37. What’s Coming ….
There are also four other entities including Drolia Agencies, GRD
Securities, Adesh Broking and Confirm Rebuild who together own
about 7% stake in NDTV.
( They will be easily bought )

38. But The Roys are Giving a Tough Fight
The only way the Roys can get out of this is to finds loopholes with
the way Adani acquired VPCL
#1 The Timing :
In what seems like a hurried takeover, we need to ask if Adani
Enterprises followed due procedure while acquiring VPCL.
There have to be resolutions and approvals even for a private company.
If any of that was violated, then NDTV can challenge the takeover

39. What Can the Roys Do?
• Acquired Without Discussion Consent or Notice’: NDTV
• Following the takeover, NDTV alleged that the move had come
without “notice.”
• "The NDTV founders and the Company would like to make it clear that
this exercise of rights by VPCL was executed without any input from,
conversation with, or consent of the NDTV founders," the statement
read.

40. The Big Fight ….
• Was Adani Legally Obligated to Serve Notice?
• Although issuing a notice is good business practice, Adani Enterprises
is not legally obligated to issue a notice if the terms of the loan
agreement don’t warrant it
• In fact, the terms of the loan agreement, were such that
Vishvapradhan, could convert it into 99.9% of the shares in Radhika
Roy-Prannoy Roy Private Limited “at any time during the tenure of the
loan or thereafter without requiring any further act or deed on the
part of the lender.”

41. The Big Fight
The loopholes
Even if we were to consider that the terms were such that the loan
would not get converted automatically, the market practice is that a
notice has to be given to RRPR, not to its subsidiary NDTV.

42. The Big Fight ….
Per the terms of the agreement, the Roys had to return the loan money
to VCPL in 2019, the failure of which has now given full control of RRPR
and consequently the company’s holding in NDTV to VCPL. To recover
its loan, VCPL has now sold the collateral it held to Adani.

43. The Big Fight
• Following this transaction, VCPL, AMG Media Networks (Adani
Group’s media arm) and An announcement by VCPL to the stock
exchanges said that it, along with the two Adani companies, would
offer to acquire the NDTV shares at ₹294 a piece. NDTV shares closed
at ₹366.20 on the BSE.

44. The Fight Back
• NDTV said the Roys were prohibited from dealing in India's securities
market until November this year due a 2020 SEBI decision in a case of
suspected insider trading and therefore RRPR cannot convert the
warrants it issued to VCPL.
• Although Adani said SEBI restrictions were not applicable on RRPR,
both Adani and NDTV have now sought clarifications from the
regulator.

45. The Big Fight …
• If SEBI takes a view, it could become part of the litigation.
• No response from the regulator could delay the deal.
• If SEBI gives up jurisdiction, Roys can take the matter to court.
• only way Roys can fend off the takeover attempt is to find
a white knight but that it’s a tough task.

46. As of Now …
• Meanwhile, Adani’s open offer for an additional 26% stake in NDTV
will tentatively open on October 17th. The response, however, could
be tepid, since NDTV shares are trading at a 75% premium to the
open offer price.
• While it’s uncertain if SEBI and Income Tax department will come
back with a quick response, the Roys could have a surprise to throw.
• They can bring up a clause from the original loan agreement which
states that VCPL and its affiliates cannot purchase shares of NDTV
which will increase their holding to more than 26% in the company
without the consent of the other parties.

47. The Bigger Picture

48. Strategic Questions ….
• 1. What is Controlling Stake ?
• 2 What is the meaning of Hostile Takeover ? How can companies prevent
Hostile Take overs ?
• 3 How Does SEBI protect the interests of Minority Shareholders ?
• 4 What do you think is the best Course of Action for the Roy’s ?
• 5 Why does the Adani Group want Control of NDTV ?
• 6 How will the Political Climate in India impact the Deal ?
• 7 What is the future of Corporate –Media Relations ?
• 8 Why Do You Think The Roys did not pay off the loan ?
• 9 How did the Adani’s acquire VPCL at such a low cost ?

49. What We Need to Understand ?
• What’s a Controlling Stake ?
• A shareholder has controlling interest in a business when he or she
owns more than 50% of the company's voting shares, giving him or
her the deciding voice in shareholder meetings and control over
company direction.
• a shareholder who owns enough shares in a company to control its
management: With 30% of the equity and 65% of the voting rights,
they have become the corporation's new controlling shareholder

50. Controlling Stake
• Having a controlling interest provides a shareholder with significant
power and influence within a company.
• Ownership of operational and strategic decision-making processes is
given to a shareholder with a controlling interest.
• A controlling interest grants leverage to increase a shareholder's stake
in a company in a merger or acquisition.

51. Advanatges
• The upside of holding a controlling interest in a company can come in
many forms.
• First, a controlling interest gives a person or group of people
substantial influence.
• Since, by definition, the party with controlling interest automatically
has the majority vote, it allows an individual to veto or overturn
decisions made by existing board members.
• This gives people who have a controlling interest in a company the
ability to take ownership of the operational and strategic decision-
making processes.

52. Example
• Google's parent company Alphabet structured its shares strategically.
• Larry Page, Sergey Brin, and Eric Schmidt each have a controlling
interest, owning over 60% of the company’s B voting shares that carry
10 votes per share.
• In contrast, the Class A shares have only one vote per share, while
the company's Class C shares have no voting rights.

53. Managerial Ownership
• Managerial ownership is measured as the percentage of equity
shares owned by directors' and their immediate families at the
accounting year end.
• Businesses and the families that own and operate them, grow and
evolve. As startups gain momentum, non-family staff are hired and
assigned to various positions within the organization and external
shareholders may enter the business. With each new familial
generation, marriage, or partnerships, the number of shareholders
multiplies.