Adani group's acquisition of 34-year-old broadcaster NDTV will help its owner Gautam Adani, the world's fourth-richest man, to join a club of global tycoons in the media business.
But behind that acquisition is an unpaid loan that New Delhi Television's (NDTV) founders Prannoy and Radhika Roy had taken from a company linked to rival billionaire Mukesh Ambani in 2009-10.
Vishvapradhan Commercial Pvt Ltd had loaned Rs 403.85 crore to NDTV promoter company RRPR Holding Pvt Ltd. Against this interest-free loan, RRPR issued warrants to VCPL entitling it to convert them into a 99.9 per cent stake in RRPR in case it isn't paid-back.
Also Read | NDTV's loan agreement 2009: Lender, borrower to scout for 'stable-reliable' buyer for holding firm
VCPL ownership changed hands in 2012. Adani group firm first acquired VCPL from its new owner and exercised the option to convert unpaid debt into a 29.18 per cent stake in the news channel company. Thereafter, it made a Rs 493 crore open offer to buy an additional 26 per cent stake from the public in line with the country's takeover norms.
Roys considered Adani's approach hostile, saying the acquisition was without discussion, consent, or notice.
With NDTV, Adani joins the league of the likes of Jeff Bezos who owns the Washington Post and the Murdoch family that runs Fox Corporation.
Back home, the ports-to-energy group's most high-profile bet in the media sector will rival Ambani who already has a sizeable presence through Network18, which runs a bouquet of channels, including news channel CNN-News18 and business channel CNBC-TV18.
NDTV operates three national news channels - English news channel NDTV 24x7, Hindi news channel NDTV India and business news channel NDTV Profit.
It also has a strong online presence and remains one of the most followed news handles on social media with more than 35 million followers across various platforms.
The Loan Story
RRPR Holding, which was a promoter group entity and then held only a 7.56 per cent stake in NDTV, took the loan on behalf of NDTV from VCPL in two tranches (Rs 350 crore in July 2009 and another Rs 53 crore in January 2010).
Incorporated in 2008, VCPL describes itself as a management and consultancy services company but owns no assets.
VCPL had got the money from another company called Shinano Retail Pvt Ltd in the form of another unsecured loan the same financial year. Shinano had got the money - also in the form of an unsecured loan - from Reliance Industrial Investments and Holdings Limited, part of Ambani's Reliance Industries Ltd.
The loan agreement required Prannoy Roy and Radhika Roy, who together held 55.5 per cent in NDTV at the end of June 2009, to transfer some of their shares to RRPR Holdings.
Due to these terms, RRPR Holdings' stake in NDTV increased to 29.18 per cent by January 2010.
In 2012, Reliance divested VCPL to Nextwave Televenture Pvt Ltd and Skyblue Buildwell Pvt Ltd - companies linked to Mahendra Nahata, a director at Reliance Jio Infocomm Ltd, a subsidiary of Reliance Industries Ltd. Ambani's Jio had bought Nahata group's Infotel Broadband in 2010 to re-enter the telecom business.
According to the terms of the loan agreement, VCPL could convert the debt into 99.9 per cent of the shares in Radhika Roy Prannoy Roy Pvt Ltd (RRPR) "at any time during the tenure of the loan or thereafter without requiring any further act or deed on the part of the lender".
On Tuesday, AMG Media Networks Ltd, a wholly-owned subsidiary of Adani Enterprises, bought 100 per cent of the equity stakes in VCPL for Rs 113.74 crore. It then converted the warrants into equity, getting a 29.18 per cent stake in NDTV.
Radhika and Pranav Roy continue to hold a 32.26 per cent stake in NDTV.
The VCPL loan had previously led market regulator Sebi to haul up Roys for not disclosing the terms of the VCPL loan to investors.
The same loan has now become the reason for an apparent 'hostile' takeover.