In 2009, a Mukesh Ambani group entity took control of NDTV under the guise of a loan agreement. The plan was to find a buyer in “three to five years”. No buyer has been found so far and effectively, NDTV is controlled by the Ambanis
In July 2009, Vishvapradhan Commercial Pvt Ltd, a company associated with Reliance Industries Ltd (RIL) gave a loan of Rs350 crore without any interest to NDTV's Prannoy Roy, his wife Radhika Roy and their private holding company RRPR Holding Pvt Ltd. This was a bailout-cum-takeover in the guise of a loan.
The sole purpose of the loan was to repay funding obtained by Roys obtained from a bank, which is barred by the market regulator. Under the agreement signed on 21 July 2009, the Roys were to issue a convertible warrant that equals to 99.9% of the “fully diluted equity share capital of the borrowers (the Roys and RRPR Holdings) at the time of conversion” and the Ambani group agreed to limit their aggregate shareholding to 26%.
Let us unravel for you this wonderfully structured “loan document” which effectively allowed Ambani to take over the company with a few key clauses.
1. Clause 6 of the agreement talks about the warrant; the details of what this mean are a part of Schedule 1, under terms of the warrant. This says “at the sole option of the lender (Ambanis)”, the warrant can be converted into the underlying equity shares “at any time during the tenure of the loan or thereafter without requiring any further act or deed on the part of the lender”. An agreement, which allows the lender to convert a warrant into share even after the tenure of the loan, can only be a sale.
2. The loan/sale had two conditions. First that the Roys would have to transfer 26% of their equity to RRPR Holdings through the sale of 1.63 crore equity shares. Secondly, that a company called NDTV Four Holdings Ltd, would invest $85 million in NDTV Studios Pvt Ltd and this would be brought into the parent company NDTV through a merger or some other means. The agreement does not go into details about what is this holding company and why the pre-condition of bring back $85 million to India, but we learn this is under investigation.
3. Another clue that this loan is actually a sale is in Clause 11. It says that the borrower RRPR Holdings will have only three directors; of these, the lender (read Ambani group) will nominate one. More importantly, there can be no quorum unless this nominee director is present at every board meeting. Of course, there is also an undertaking that the lender will not interfere with the editorial policies of NDTV, but we can surmise how effectively that would work.
4. Clause 19 is titled “Mutual Endeavour”. It says that over the next three to five years the Ambani group and RRPR would look for a “stable” and “reliable” buyer for RRPR who will “maintain the brand and the credibility of NDTV”. It is now over five years since the agreement was signed, which explains the rumours about the possible sale of this crucial holding that is key to the ownership of NDTV. But it also raises another question: were the Ambanis only bailing out NDTV for someone else? Ambani also owns Network 18 group and reportedly has stakes or has offered similar friendly bailout loans to several other media groups, making it among the largest media owners in India.
5.
Now let us look at some more corroboration. The agreement on behalf of Vishvapradhan Commercial is signed by Mr KR Raja.
A simple google search shows that Mr Raja is the same person, whose private telephonic conversation with lobbyist Niira Radia led to Reliance Industries issuing a profuse apology in June 2011, to P Chidambaram, the then Home Minister. More about Vishvapradhan Commercial’s transactions and its connection with Reliance is available in this report in
Newlaundry and e-magazine. Mr Raja also figures in connection with RIL’s purchase of a stake in NewsX, which was subject of an investigation by the Serious Fraud Investigation Office (SFIO). This was reported by a media website called
The Hoot.
6. Everybody knows that a loan agreement is concerned about interest and not valuation. This one is different. Schedule 3 (2) and sub clauses b, c and d to the loan agreement deals with issues relating to NDTV and the NDTV Group that need “prior written consent” of the Ambani company. It documents the minimum valuation of the group at Rs1,346 crores; any corporate action below this requires the lender’s permission.
7. Other issues that require such consent pertain to the possible amalgamation, consolidation, merger of NDTV with any other entity, buyback of equity, reduction or alteration of its share capital or any action with regard to the share capital where by the promoters cease to be in sole control of NDTV and the NDTV group.
8.
These clauses make it very clear that NDTV’s promoters can do almost nothing without the consent of the Ambanis.
Curiously, none of this is known to the public or to the shareholders and stock exchanges. While
SEBI has recently imposed a fine of Rs2 crore on NDTV for a disclosure lapse of I-T notice, the non-disclosure of what it has signed in this loan document appears far more serious.
The iron-clad agreement signed by RRPR and the Roys with Vishvapradhan Commercial in 2009 make it clear that the Ambanis have had complete control over this group. But it is still not clear whether the group is the ultimate beneficial owner.
An email sent to NDTV has elicited no response. This story will be updated if and when we hear from the group.
Prannoy Roy- it's not his complete name as he has hidden his Christian Name....!!!!
Unfortunately, in our country things always fall out after years..? What do Govt. and it's various departments verify or securtinise documents at the time of issue of a Licence for starting the TV channel etc etc...?
Even now some visible action is taken would be a face saver for the country or another Mallaya will be born...!
1. In Re:" 'at the sole option of the lender (Ambanis)', the warrant can be converted into the underlying equity shares 'at any time during the tenure of the loan or thereafter without requiring any further act or deed on the part of the lender', please clarify whether this clause apply irrespective of payment of loan. You say the loan is interest free; so, what happens if the loan is repayed.
2. What is the tenure of the loan agreement?
3. As per the shareholding pattern dt. March 2015, available on NDTV website, the promoter share, i.e. Roy's and RRPR, is 61%. You say Roys were to issue convertible warrant to the extent of 99.99% of promoters' share, and then that Ambani group agreed to restrict its shareholding to 26%. What do you mean? If Ambani has discretion to convert all warrants, how and why should they it restrict it to 26%?
You have raised more questions than answering them. Why don't you upload the agreement on your website.
Government's Arun Jaitley wanted to give RBI Government multi crore bonds issuance rights to SEBI.
Legal Eagles /Business Media world created 2008 melt down.Be ready for similar replay soon in BRICS.
Challenges are Free Media is myth.Everything is sold/bought.Few integral Executives investigate this stories Salute them.
Well in USA Cisco/Microsoft/ GE/Google etc have their billions in Ireland etc tax havens & US government cannot do anything.God Knows is US Government is supporting them,possibly Yes but question is WHY?
Ans is simple make State Bankrupt insolvent.Get Trillions $$ of loans.Issue bail outs to Banks.Kill Middle class.Beggar neighbours by printing $$ /Euros/Yen bonds & let markets become ineffective for business & have crash with JOY.
So it happens ONLY in India & also in USA.
Where are we going wrong.Values Systems.
Corrupts Rule because Honest are Silent.Let honest cheat get rich & fight with rich.Bad bit possible.
Mahesh
Rajat Narain
I will be quite happy to have the media channels under Ambani and other industries, rather than under the round tripped black money of Congress people.
An astute bridge and poker player, Mukesh knows very well that revealing your intentions is a blunder in business that depends so much on sentiments.