NDTV rights issue: Retail bids pick up pace, here’s what it means for ownership

New Delhi: With three trading days left in New Delhi Television’s rights issue, retail participation has begun to firm up after a slow start. 

Exchange data at 5.00 pm on October 3 showed cumulative ASBA bids of 41,79,484 shares against 4,83,53,450 shares on offer at Rs 82 each. On a simple headline basis that works out to about 8.6 per cent subscription so far. 

Also read: Explained: NDTV, the loans that cost control, and the paths Prannoy Roy didn’t take

Because the data captures only trading via BSE and NSE, it should be read as a direction, not the final tally. 

NDTV’s latest public shareholding sits in the mid-thirties as a percentage of the pre-issue capital, which implies that roughly 1.71 crore of the 4.83 crore rights shares are notionally available to the public on a pro-rata basis. 

Measured on that base, the 41.8 lakh applications already in the system represent about 24-25 per cent of the public entitlement. That ratio looks low at first glance, but it is typical for the mid-issue checkpoint. Small shareholders tend to line up funds late, and buyers of rights entitlements in the market usually file forms in the last forty-eight to seventy-two hours.

NDTV’s fully paid share last traded at about Rs. 115.55 on October 3, which leaves a near 29 per cent gap to the Rs 82 rights price. When a visible discount coincides with a closing window, retail applications usually bunch up. 

If that pattern repeats, a reasonable base case is that non-promoter investors finish at around 65 to 85 per cent of their collective entitlement. 

In share terms, that implies final retail take-up in the 1.20 to 1.50 crore range. At the issue price, this would translate into Rs 98 crore to Rs 123 crore raised from the public, with a midpoint near Rs 111 crore if the close is orderly.

For the context, if the public takes up 100% of its pro-rata entitlement, NDTV would raise about Rs 135 crore from non-promoter investors.

It is important to underline that a rights issue does not need 100 per cent public subscription to succeed. Unlike an IPO, there is no 90 per cent minimum subscription floor, and underwriting is not mandatory. 

Any shortfall can be allotted to shareholders who apply for additional shares, including the promoter group, within the regulations. 

In practice, many Indian rights issues close shy of full public take-up and still deliver the intended proceeds because promoters and larger holders mop up the residual. 

NDTV is targeting Rs 396.5 crore by issuing 4.84 crore shares at Rs 82 in a three-for-four offer, and even at the midpoint public outcome above, there is ample room for the promoters to carry the balance.

NDTV has earmarked a large part of the proceeds for repayment of inter-corporate deposits owed to the Adani group. If the promoters subscribe substantially and the company then uses the fresh cash to repay those loans, the economic effect is a swap of debt for equity. 

In this case, promoter exposure moves from creditor status into additional shareholding, company leverage comes down, and the promoter percentage can inch up if the public does not take its full entitlement. 

On simple scenarios, if public shareholders subscribe to only about 70 to 80 per cent of what they are entitled to, the promoter holding would drift from the mid-sixties into roughly 67 to 69 per cent after allotment, while public ownership would slide to about 31 to 33 per cent. 

If the public fully takes its entitlement, promoter and public percentages would remain broadly where they were before the offer. 

The precise number will depend on how much of the residual the board allots as additional shares and how many institutional public holders come in late.