Explained: How Adani moved stealthily to acquire NDTV stake

When India's richest man Gautam Adani unveiled plans for his firm to control a majority stake in New Delhi Television (NDTV) on Tuesday, it was the stealth approach in executing the transaction that drew most attention in the news industry.

This is how the firm controlled by the Adani family went about planning the takeover along with NDTV's options, outlined by lawyers.

A company called VCPL

At the heart of Adani Group's two-stage plan to snap up a majority stake in NDTV is a little-known Indian company called Vishvapradhan Commercial Private Limited (VCPL), founded in 2008.

Read | Adani's 'totally unexpected' bid propels NDTV stock

More than a decade ago, NDTV founders Radhika and Prannoy Roy took a Rs 4 billion loan from VCPL, and in exchange issued warrants that allowed the company to acquire a 29.18 per cent stake in the news group.

Those warrants were convertible at any time. Adani Group said on Tuesday it had acquired VCPL and exercised those rights, which should give it the 29.18 per cent stake.

NDTV said it has been given two days to transfer all the shares to the now Adani Group-owned VCPL.

Adani Group's takeover bid is without NDTV's consent, the news organisation said in a statement hours after the announcement. Internally, an NDTV memo referred to the move as "entirely unexpected."

The memo added the company was "in the process of evaluating next steps, many of which involve regulatory and legal processes," without elaborating further.

An open offer

Adani Group's indirect control over a stake above 25 per cent means it must put forward an open offer to purchase at least 26 per cent more from existing shareholders to give them an opportunity to exit, according to Indian regulations.

Laying out its plan, the Adani Group said the open offer will be at 294 rupees per NDTV share for a total consideration of up to $62 million. At the full take-up, this would give it 55.18 per cent of the popular news network.

The price was at an unusual 20.5 per cent discount to NDTV's close of 369.75 rupees, though shares had surged in the last month.

Founders not in divestment talks

The day before Adani Group's plans became public, NDTV said in a stock exchange disclosure that the Roy founders were not in talks with any entity for a change in ownership or a divestment of their stake in NDTV.

If the Adani Group deal succeeds, the founding duo will hold around 32 per cent of NDTV, the internal memo stated.

What is next for NDTV?

Although NDTV has said the move was without its consent, four lawyers who spoke to Reuters on Wednesday said that Adani Group is well within its legal rights in the deal process so far.

NDTV, they said, has limited options.

The founders could try to stall Adani Group's bid by alleging breach of contract and approach an Indian court for relief, said one Indian law firm partner specialising in M&A transactions.

Another lawyer said NDTV should have seen this coming as its founders had issued warrants to VCPL years ago and there was always a possibility a company could execute them to acquire a stake.

One option would be for the owners to make their own open offer at a higher price to try to increase their stake.