This story begins more than 14 years ago, in 2008, and meanders through several twists and turns. The process encompasses issues related to politics, corporate finance, the stock market, media ambitions, and personal equations. As the Adani Group prepares to swallow and take over NDTV, a prominent media company, and the Roy family (wife-husband Radhika and Prannoy), the owner, takes steps to defend its empire, the tale raises unanswered questions that are intriguing and mystifying. This piece clears the prevalent fog of confusion.
Most articles on the issue focus on the political and media-related implications of the Adani-NDTV deal.
This article will dissect the process, a maze of corporate trails that leads from Mukesh Ambani, the promoter of the sprawling oil-to-tech Reliance Group, to Gautam Adani, the fourth richest global billionaire whose net worth has catapulted 18 times to $145 billion in the past few years. It provides insights into what to expect in the near future.
Will Adani succeed, as it seems now, or will the Roy family manage to survive, which looks tough?
Why did Mukesh Ambani sell NDTV stake to Gautam Adani?
In June 2008, the Roy family decided to openly buy NDTV shares from the other shareholders through what is technically dubbed an ‘open offer’. Prannoy and Radhika borrowed ₹540 crore from Indiabulls Financial Services to finance the purchase. In October 2008, they took a loan of ₹375 crore from ICICI Bank to pay back Indiabulls. In both cases, the promoters pledged their shares against the loans. In July 2009, the Roys asked the Mukesh Ambani-owned firm for a ₹350 crore loan, which went up to ₹400 crore in 2010, to return the money to ICICI.
While the Ambani loan came free of interest—the interest on the ICICI loan was 19% per annum—it had several crucial riders. The prominent one was that if the Roy family was unable to pay back the amount, Ambani was entitled to own a 29% stake in NDTV at the pre-decided price of ₹214.65 per share. The NDTV stock price then stood at ₹130, although it had peaked earlier at ₹482. However, Ambani never exercised the right to own the shares. Now, Reliance insiders contend that there were two degrees of separation between Ambani and Adani.
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Three years after the Ambani-Roy deal, in 2012, the Ambani-owned firm which gave the loan of ₹400 crore, was sold to Mahendra Nahata Group. A few years later, Surendra Lunia Group purchased the company. This year, Lunia sold it to Adani Group, which exercised the right to convert the loan into a 29% stake in NDTV. Adani announced an ‘open offer’ to further acquire 26% from existing NDTV shareholders. Thus, claim Reliance insiders, Ambani did not sell to Adani. Lunia did.
However, this seems a bit specious. Nahata is a director in Reliance Jio Infocomm, Mukesh Ambani’s telecom venture. Nahata purchased an all-India telecom spectrum in the 2010 auction and sold it to Reliance Group the day the auction ended. Lunia worked as CEO of Nahata’s flagship company for a decade. Lunia was a director in a small entity which purchased HomeShop18, the e-commerce venture of Network 18 Group that was, and still is, owned by Ambani. The Lunia-Adani deal seems far-fetched without Ambani’s nod.
Why didn’t Ambani try to take over NDTV, as Adani has done?
Three reasons can explain Ambani’s lack of enthusiasm to buy NDTV. The first is political—the Roy family was close to the Congress party, whose coalition was in power until 2014. In 2009, the party came back to power. The second relates to strategy. In 2011–12, Independent Media Trust (IMT), whose sole beneficiary (controller) was Ambani’s Reliance Industries Ltd (RIL), received ₹2,200 crore from RIL to enable Raghav Bahl, the promoter-founder of Network18 Group and sole trustee of IMT, to subscribe to his entitlement of the rights issue of two group firms, NW18 and CNBC18. The amount was in the form of a zero coupon (zero interest), optionally and fully convertible debentures, i.e., IMT could convert it into equity shares of Network18 firms. Reliance insiders claim that Ambani was more interested in the larger Bahl’s group, rather than NDTV. In 2014, RIL gobbled up Network18.
The third reason is in the realm of personal chemistry. The Ambani-Roy agreement allowed the Roy family to retain editorial independence and brand management of NDTV. It guaranteed minimal interference in day-to-day operations, albeit with mutual consent clauses for expansion and future investment. In 2015, NDTV publicly announced that the Roy family was in control and there was no influence from outsiders. This hints that Ambani and Roys were on the same page from day one, and the former had little intention of buying out NDTV.
What is Adani’s rationale behind NDTV’s takeover?
Most articles on the Adani-NDTV transaction delve into its politics. The argument goes that Adani, who is perceived to be close to the central ruling regime, can change the editorial tone of one of the media entities that isn’t pro-government. But there is a business rationale too. If Adani’s media venture has to take off, he has to have properties before the 2024 national elections. Even as he seeks to dig his fingers into a ‘big whale’—rumours abound about his interest in one of the largest media empires—he has to buy out small fish, like NDTV and Quint website.
However, it is unlikely to be an easy journey. Radhika and Prannoy will not give in easily. They will fight—legally, politically, and through shareholders and media. Adani’s price for the open offer to buy a further 26% in NDTV, apart from the 29% he will own, is ₹294 per share, which is way below the current market price of ₹471.50 (12 PM; August 30, 2022). Since Adani entered the fray, the stock price has skyrocketed. The Roy family will continue to hold more than 32% of NDTV. A war between the not-so-weak David and Goliath is imminent.