RRPR Holdings board has to act in its fiduciary capacity, say lawyers

The board of RRPR Holdings, a promoter entity of New Delhi Television (NDTV), will have to allot shares against warrants issued in the past to Vishvapradhan Commercial (VCPL) – now a company owned by Adani Group.

This is for past contractual obligations made by RRPR Holdings. The company and its board cannot act in an individual capacity, but act instead in a fiduciary capacity, said lawyers aware of Adani’s plans. 

The conversion of issued warrants into equity cannot be prevented by founders Prannoy Roy and Radhika Roy, even if they are part of the board, as the company is different from individuals, observed lawyers.

Besides, markets regulator Securities and Exchange Board of India (Sebi) has not blocked RRPR Holdings from meeting its past contractual obligations for which money has already been paid in 2009 and warrants approved by the board and issued, said lawyers.  

“The onus is on the board of RRPR Holdings to issue shares against already allotted warrants, which is now a mere procedural step,” they said. 

At present, Prannoy and Radhika are directors of the holding company.

The lawyers also emphasised that past obligations of 2009 made by RRPR Holdings are not affected by the Sebi order of 2020 against individuals - Prannoy and Radhika. Both were fined by Sebi for insider trading in 2020 and banned from dealing in securities until November this year.

In July this year, the Securities Appellate Tribunal (SAT) gave partial relief to the Roys and reduced the fine. 

After Adani Group acquired VCPL and exercised its rights to exercise the warrants last week, NDTV in a statement said since Sebi has banned its promoters from dealing with any securities for two years beginning November 2020, they will not be able to issue/transfer RRPR Holdings shares to VCPL until November this year.

RRPR Holdings, in turn, holds 29.18 per cent stake in NDTV and an open offer was made by VCPL last week at the rate of Rs 294 per share – in line with Sebi formula. The lawyers said the BSE-listed NDTV has already taken VCPL’s open offer into cognisance by deferring the date of the annual shareholders’ meeting to September 27, from September 20.

A detailed public statement will be filed by bankers to the issue by early next week with the markets regulator. The open offer price is based on Sebi formula and gives the exit option to all shareholders, including the Roys, said lawyers.

The Roys will hold a 33 per cent stake in the company once RRPR Holdings transfers the shares to VCPL.

Adani Group plans to await Sebi’s directions in the matter as VCPL has made the open offer after exercising the warrants in accordance with Sebi’s earlier directions to VCPL, said lawyers.

According to a SAT order, in June 2008, the promoters of NDTV made an open offer for the shares of NDTV. To finance the open offer, they had borrowed around Rs 540 crore from Indiabulls Financial Services and had pledged their shares in NDTV as security, in keeping with court filings.

In October 2008, the promoters took a loan of Rs 375 crore from ICICI Bank to repay Indiabulls Financial Services.

The ICICI Bank loan carried a rate of interest of 19 per cent per annum. The promoters, in order to secure the borrowing of Rs 375 crore, had encumbered their entire shareholding in NDTV by way of non-disposal undertakings with ICICI Bank. The Roys also provided personal guarantees for this loan.

In July 2009, the promoters took an interest-free loan of Rs 350 crore from VCPL (then owned by an affiliate of Reliance Industries) in order to repay ICICI Bank.

RRPR Holdings, the Roys, and VCPL were signatories to the loan agreement.

Another loan was taken by the promoters from VCPL on January 25, 2010, for Rs 53.85 crore.