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Lecture on "NDTV Takeover" by Khushboo Narayan
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Navneeta Nandan
5:32
Hello and Welcome to a Special Lecture on "NDTV Takeover" by Ms. Khushboo Narayan, Bloomberg Course Dean of Asian College of Journalism.
5:36
Mohan Ramamoorthy, Associate Dean of ACJ introduces the speaker.
5:37
Khushboo Narayan is an award-winning journalist. She has worked on several investigative journalism projects.
5:39
Khushboo kicks off the session by stating that this takeover affects everyone in the media industry in some or the other way. She intends to explain the necessary terminology. The genesis of this issue was in 2009.
5:40
She begins to explain the importance of stakeholders. Takeover means Company A taking control of Company B. Takeover can be for better efficiency, for technology transfer or for entry into a new market.
5:41
"Majority of takeovers are friendly in India," she adds.
5:42
SEBI is the capital markets regulator. It has laid down some guidelines. It intends to do so keeping in mind the interests of public shareholders, not companies.
5:43
She starts to talk about the NDTV takeover and says: "In the case of NDTV, this move by Adani, as stated by the Roys, was without consultation. Hence it is a hostile takeover."
5:44
She continues to elaborate on the topic: "Buying shares of the target company on open market can be one way of takeover. In the case of NDTV, a majority of shares were acquired by Adani."
5:48
Khushboo explains that an open offer is triggered when a company acquires more than 25% shares. She underlines that the public shareholders in the acquired company are given an exit option for a certain time at a certain price.
5:51
She states the only two successful hostile takeovers in India: one, India Cements taking over Raasi Cements and two, L&T taking over Mindtree.
5:53
She further highlights on the strategies by saying: "The board of management of the acquired company do not have to give in necessarily. They can employ some strategies like White Night, Poison Pill, Golden Parachute."
5:54
She explains the White Knight strategy where the acquired can reach out to another company with deep pockets. She cites an anecdote regarding Manu Chhabria. "L&T approached Reliance to be their White Knight. The White Knight eventually became greedy and Dhirubhai Ambani became the chairman! The White Knight turned into a Dark Knight."
5:57
5:58
Elon Musk used the Poison Pill strategy initiating a hostile takeover of Twitter. Twitter diluted the share value to counter this. Then Musk would have to spend more to acquire the same amount of shares.
SEBI does not define hostile takeovers. The company that takes over other company is typically painted as villain but they are not. She highlights that ethics are not in binaries here.
5:59
6:00
Moving forward, she gives the specifics of the NDTV case. She says: "In 2007, NDTV had to buy back General Atlantic. This 8% of buyback triggered an open offer which was priced at Rs. 439 per share. A company called RRPR instead borrowed money and ended up holding a stake in NDTV in individual capacity. Another 29% through RRPR."
6:02
Do you agree the acquisition of NDTV by Adani is a 'hostile takeover' ?
YES (100% | 6 votes)
 
NO (0% | 0 votes)
 
Total Votes: 6
6:03
After the 2008 economic crisis, NDTV fell to Rs. 150 shares. The value of the collateral declined consequently. ICICI demanded a repay.
6:05
VCPN and RRPR got into a loan agreement. This is a key document when this case will inevitably, according to Khushboo, go to court. Warrant is an instrument which gives the holder a right to convert it into equity shares which would mean 99.99% holdings of RRPR. "The circumstances of this agreement are not known and hence we shouldn't assume," says Khushboo.
6:08
RRPR and NDTV had to take prior permission from VCPN. It
shall not interfere with the editorial policy of NDTV. The agreement was that VCPL will not acquire more than 26% shares in NDTV without the consent of the promoters.
6:10
Graphical representation of the NDTV takeover.
6:11
Khushboo anticipates that lawyers will use this in court eventually. It was through buying VCPL that Adani acquired 99.99% control over RRPR which means that they have control over 29% in NDTV. She adds that, in a sense, this is a hostile takeover as the Roys were blindsided. Technically it is a takeover.
6:12
She presents a contending school of thought which says that the Roys gave up control of 29%stake back in 2009 itself. So this takeover should not be a surprise.
6:13
"Picture abhi baaki hai," says Khushboo to underline her point.
6:14
6:15
She quotes a similar case of Raghav Bahl when he took a loan from Reliance in 2014. Reliance exercised its right and got back the company.
6:17
She reminds the audience of NDTV's 25th August statement that the Roys cannot deal in the securities market as they have been banned from the security markets by SEBI. Thus, any company owned by them cannot trade shares. This is until November. According to Khushboo, this is a smart move.
6:19
She suspects that, some insider must have leaked information about Adani takeover. SEBI should investigate the 180% spike in NDTV share price rise. According to her, it is an unusual price movement.
6:22
She continues to present her hypothesis that maybe Adani doesn’t want control of NDTV as of now, maybe Adani wants to be solely a shareholder. He can block all special resolutions- buying back shares, appointing directors- any investment company wants to make. This can be a hindrance to NDTV management.
6:24
They can employ another method by allowing an open market and continue to buy little shares of NDTV like creepy acquisition. More than 5 shares can trigger an open offer. She says that Adani will most likely take this to court. And she anticipates that Roys will then invoke the loan agreement clause.
6:28
Khushboo explains how this would affect the media. One of the reasons why the need for independent journalism is because of the growing power of corporations and the government wants to control the narrative. For corporate giants, the media business is a very small aspect in the larger scheme of things.
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