Billionaire Gautam Adani is set to control at least 29 percent of NDTV for Rs 113 crore. The acquisition, announced last week, triggered an open offer for the Adani group to buy another 26 percent of the TV network for nearly Rs 490 crore – 16,762,530 shares at Rs 294 a pop.

The roots of this “hostile takeover” go back to 2009, the year NDTV co-founders Radhika and Prannoy Roy borrowed Rs 403 crore from Mukesh Ambani’s Reliance.

It seems the TV news network was blindsided by the Adanis. Shortly after the Adani group announced the buyout, NDTV said it was done “without any input from, conversation with, or consent of the NDTV founders, who, like NDTV, have been made aware of this exercise of rights only today”.

The 2009 agreement with Reliance put significant restrictions on the authority the Roys could exercise at NDTV. It governed the terms of the loan between NDTV and Vishvapradhan Commercial Private Limited, or VCPL, the company used to funnel the loan into the network.

The Roys could not, for instance, raise money for the TV network or create a subsidiary without the written consent of the associates of Ambani.

The loan agreement allowed VCPL, controlled by Ambani’s associates for almost 13 years after the 2009 loan, to buy 29 percent of NDTV by converting the debt into equity. This 29 percent of NDTV rested in RRPR Holdings Private Limited, the network’s parent entity, which borrowed Rs 403 crore from Reliance and lists the Roys as directors.

VCPL now has new owners – the Adanis, who bought it for Rs 113 from Ambani’s associates last week.

The 2009 agreement

The takeover of NDTV’s parent company, the 2009 agreement stated, could be done without the co-founders’ consent “at any time during the tenure of the loan or thereafter without requiring any further act or deed on the part of the lender”.

How the loan went from Reliance to NDTV’s parent company was first reported by Newslaundry in 2015 and the crucial terms of the agreement, key to Adani’s corporate ambush, were reported by the magazine Caravan the same year.

If NDTV mounts a legal challenge to Adani’s acquisition, this clause of the 2009 agreement might pose a problem. It blunts the network’s protest of no consent before the takeover since the agreement did not provide for consent before the takeover.

The agreement had other terms. Another clause in the section titled “terms of the warrant” laid out the only prerequisite for the buyout.

VCPL would have to issue a “conversion option notice” to RRPR. And within two business days of its receipt, the agreement states, NDTV, “on payment of the requisite amount”, shall “allot to the lender or any person nominated by the lender such number of equity shares as specified in the conversion option notice”.

This means the Adani-controlled VCPL – effectively the “lender” in the agreement – had to only issue a notice to NDTV to convert the loan into equity shares.

According to the NDTV statement last week, the Adani group did issue this notice.

Interestingly, the agreement also allowed the Adani group to take control of the network’s parent company in parts. The loan could be converted into shares, it said, “in one or more tranches” until it totalled 99.99 percent of RRPR. The group did not exercise this option and made a grab of the entire parent company at once.

The terms of the agreement do not seem to provide room for NDTV to wiggle out. The network, it says, “shall execute such documents, deeds and writings, do all such acts, deeds and things and furnish such approvals and consents” that might be needed to convert the loan into equity shares.

Ambani’s consent

Another section called “prior consents” in the 2009 agreement limited the Roys’ authority at their news network. It contained subsections outlining what the co-founders could do at RRPR, and at NDTV, respectively, only with the “written consent” of Ambani’s associates.

The section dictated that RRPR, and the NDTV group at large, could not buy back shares or reduce or alter its “share capital” without the consent of Ambani’s associates. Nor could they “sell or otherwise dispose of any asset of” RRPR or “transfer” NDTV shares or create any “encumbrance” on them.

RRPR could not even borrow and raise money without the consent of Ambai’s associates, the agreement states, or even set up a subsidiary. The Roys also could not merge, amalgamate or consolidate any NDTV group company – not just RRPR – with another. They were barred from taking “any action” to issue shares or strike a deal that would cause them to “cease to be in sole control” of RRPR and the NDTV group.

Specifically, the Roys agreed to not issue NDTV shares in a way that would dip the network’s “aggregate valuation” below Rs 1,346 crore – the “valuation” at which Reliance “put money” into the network, says the agreement.

The language of the document is airtight. For instance, the consent of Ambani’s associates was required for any action that could cause “NDTV or any person in NDTV group to take any steps towards bankruptcy, insolvency or reorganisation, arrangement, adjustment winding up, liquidation, dissolution, composition or other relief with respect to it or its debts”.

Rumours of the Adani group taking over NDTV began last year. But in September 2021, the Adanis called them “factually incorrect”. The Roys also clarified that they “are not in discussions now, nor have been, with any entity for a change in ownership or divestment of their stake in NDTV”.

Since last week, however, the two parties have not been on the same page regarding the future of NDTV. A day after the conglomerate announced the takeover, the network hinted that the buyout would need the approval of the Securities and Exchange Board of India, or SEBI, since the regulator had barred the Roys from dealing in shares till November 2022.

The next day, the Adani group refuted this claim and said its purchase was not restrained by SEBI.

The final blow came on Sunday, when LiveMint reported that SEBI had concluded after internal consultations that it would not stop RRPR from transferring shares to the Adani group.