On Tuesday, Adani Enterprises announced that its media unit and two other entities would indirectly buy a 29.18% stake in New Delhi Television Ltd (NDTV). It further said it would launch an open offer for another 26% stake in the media house. Seemingly, the company has made Rs 493-crore open offer for a 26% stake in NDTV at Rs 294 per share.

However, the news has not gone well with the viewers. Since the news channel has claimed that the 29.18% of NDTV has been acquired without “notice, discussion, or consent”, some are even calling it a ‘hostile takeover’. The media house said that the debt was converted into equity without even taking any input from the founders or the company.

Although this is not the first time Asia’s richest man has entered a big venture. Last year, its media arm Adani Media Ventures Ltd (AMVL), acquired the digital business news platform Quintillion Business Media Private Limited (QBM). But, this would be Adani’s most high-profile bet in the media sector. 

Understanding Hostile Takeover

Hostile Takeover basically refers to the acquisition of a company (called target company) by another company (acquirer) against the consent of the former. Under this kind of takeover, the acquirer usually goes through either a tender offer or a proxy fight. The company that initiates a hostile takeover bid approaches the shareholders directly, contrary to seeking approval from the company’s directors. The one who acquires through a hostile bid is called a corporate raider. 

Hostile takeovers may also occur if a company believes that a target is undervalued or when shareholders want changes in a company.

Suppose company ‘X’ submits a bid offer to purchase company ‘Y’. Now, Y has two options- either accept or reject. In case it rejects the offer citing various reasons, option X has to force the deal through various methods, including a proxy vote, a tender offer, or a large stock. Evidently, in Adani Group vs NDTV’s case, the former has gone to acquire the channel by purchasing large stocks. 

A proxy vote is a method which allows acquiring firms to persuade current shareholders to vote out the target company’s management in order to take over easily. On the other hand, a tender offer is an offer to purchase shares from a shareholder of an acquirer’s business at a higher price than the market price.  

 Earlier instances of Hostile Takeover in India 

Hostile Takeover is not something which has emerged just now. There have been various instances of Hostile Takeovers in the past. It first started in the 1980s when London-based NRI Swaraj Paul tried a hostile bid to control the management of two Indian companies, Escorts Limited and Delhi Cloth Mills Limited. He, however, failed in his motives due to fierce opposition. Similarly, in 1997, Asian Paints faced a strong takeover threat from the London-based ICI (Imperial Chemical Industries). This, too, was not successful due to the government’s disapproval.  

In 1998, India Cements took over Raasi Cements when BV Raju sold his 32% stake in Raasi Cements to India Cements. This was the first successful hostile takeover in India. It was followed by many smaller-scale attempts, including ArunBajoriavs Bombay Dyeing, RK Damanivs VST Industries, and Harish Bhasinvs DCM Shriram Industries. 

In 2019, Larsen and Toubro Ltd (L&T) took over Bengaluru-based Company Mindtree Ltd with a 61.08% stake. The former completed buying the 31% additional stake in Mindtree for Rs 4,988.82 crore through an open offer. With this, L&T completely controlled the software company’s board and management.

Hostile Takeover Elsewhere

The history of Hostile Takeover in the United States can be traced back to the 1960s. Posner and DWG are perhaps best known for the hostile takeover of Sharon Steel Corporation in 1969. After this, many small and medium takeovers eventually didn’t work out. 

In 2004, Oracle Corporation announced the acquisition of PeopleSoft for USD 10.3 billion. This was considered an extremely hostile takeover. In fact, PeopleSoft filed a lawsuit alleging that Oracle’s true intentions were to hurt PeopleSoft’s business and disrupt the JD Edwards buyout. 

In 2010, when AOL took over much larger firm TimeWarner, it was considered the ‘deal of the millennium’ at the time. However, the former destroyed its value over time and announced a split later. 

• Preventing a Hostile Takeover 

The target company’s management may resort to preemptive and reactive defences to prevent an unwanted takeover.

• White Knight

A hostile takeover defence mechanism in which a friendly or known company acquires a corporation at fair consideration when the latter is on the verge of being taken over by an unfriendly acquirer, also known as ‘black night’. In 2001, when stockbroker RadhakishenDamani made an open offer for BAT-controlled VST Industries, ITC became a white knight. Similarly, in 2000, GESCO took the help of Mahindra and Mahindra to prevent a hostile bid by Dalmia Group.   

• Differential Voting Rights

Establishing stock with DVRs can prevent such a takeover. Under this, some shares carry greater voting power than others, making it difficult to generate the votes required for a hostile takeover.

• Employee Stock Ownership Program (ESOP)

In the ESOP plan, employees own a substantial interest in the company. Employees may be involved in voting with management, making an aggressive takeover difficult. 

• Crown Jewel

Another defence mechanism in which a provision of the company’s bylaws needs the sale of the most valuable assets in case of a hostile takeover. It is, however, used as a last resort. 

• Poison Pill

Officially termed as a shareholder’s rights plan, it allows existing shareholders to purchase newly issued stock at a discount if one shareholder has bought more than a stipulated percentage of the stock. It results in a dilution of the ownership interest of the acquiring company. The buyer is later excluded from the discount.

• Golden Parachute

It involves granting members of the target company’s executive team benefits such as bonuses, severance pay and stock options if they are ever terminated as a result of a takeover.

• Pac-Man Defence

In this tactic, the target company tries to acquire the company that has made a hostile takeover attempt. 

• Greenmail

Greenmail is a defence in which the target company buys back its own stock from the acquirer at a higher price.

Way Forward for NDTV 

Hostile or not, this takeover is strategic, for sure. Many have raised concerns over the upcoming threat to the independence of the media house, popularly known for its leftist outlook. 

Today, there is hardly any large media house which is not owned by businesses. Notably, MukeshAmbani already has a sizable presence through Network18, which runs a number of channels, including news channel CNN-News18 and business channel CNBC-TV18. 

 It doesn’t require extensive research to understand why wealthy businessmen put efforts into owning media houses. One, it helps them promote their company’s idea and perpetuate its grand image, along with silently suppressing criticism. Two, the business-politics-media nexus is the bitter truth of today. Third, acquiring a media house popularly gaining fame for its quality journalism can’t be a bad deal. NDTV’s shares soared after this unexpected bid. 

Well, what happens after this is yet to be seen. Whether this attempt works out or not, one thing is established: merger and acquisition ideas are coming out of a fidgety hunter mindset these days. When the attempt itself suggests it is hostile, there is hardly any gain, material or immaterial.

Have you ever wondered, if the greatest investors existed in the stock markets, “What stocks would they pick?” This question got us wondering about Warren Buffett too. That’s why we have created a list of Buffett’s favorite zone of stocks existing in the Indian market. He has made most of his wealth by investing in monopoly stocks. He refers to these stocks as companies with economic moats. What is a moat? Let’s find out with this example.

Monopoly or Moat?

The definition of monopoly – pure monopoly – is a company that literally has no competition. No other sellers of the particular product or service exist. Such organizations normally have prolonged existence and regular revenue. Monopoly shares have the capacity to turn out to be multibagger shares in the future.

For example, there was a time when Microsoft was the only company in the world that sold software and operating systems for computers, so entities in search of computer-based tools had exactly one option for sourcing these products.

Monopoly stocks in India also known as a ‘Moat’. A Moat is a hole that is built around a castle. It is typically filled with water and intended as a defense against the enemy. The term Moat was popularized by Warren Buffett in the world of investing.

Here’s a look at Top 5 Indian listed companies which enjoy strong monopolies in the market.

IRCTC – 100 % Monopoly

Have you ever travelled in a train except Indian Railways? I guess the answer is No. The Indian Railways have a monopoly in the railway sector. IRCTC is a state-owned enterprise that is the sole player in the Indian market.

HAL- 100% Monopoly

Hindustan Aeronautics Ltd., is another significant monopoly stock in India. The company plays a major role in the whole defense sector. Currently, HAL is majority-owned by the government and is involved in the design, fabrication, and assembly of aero planes, jet engines, helicopters, and other components.

NESTLE – 96.5% Monopoly

Nestle is one of the world’s leading nutrition, health, and wellness companies set up in 1866 in Switzerland. It has spent more than a century in the Indian markets and has become an undisputed market leader in the baby food brand Cerelac. Nestle is the parent company of the top famous brands like Kit Kat , Nestle Coffee, Milkybar, Munch. The most popular Nestle brand is Maggie.

IEX – 95% Monopoly

The Indian Energy Exchange (IEX) is the country’s first and largest electrical exchange, with a market capitalization of over $1 billion. IEX accounts for 95% of the short-term electricity contracts ( less than 1 year) traded over exchanges in India. A virtual monopoly.

MCX – 92% Monopoly

 If we talk about the commodity exchanges, there is The Multi Commodity Exchange of India (MCX) that deals in various commodity derivatives  and has a monopoly in trading of energy and metals. It has a 100% monopoly in trading precious metals, energy, & base metals. The distant competitor of the company is (NCDEX) with a market share of around 7%.

Conclusion

The stocks listed above are only intended to give you a general picture of what monopoly stocks in India are like. Please make a fundamental and technical research analysis before selecting these stocks for investment.

People were making fun in the past but ITC has smoked them into oblivion. Market participants do not leave a chance to troll ITC shares for not moving an inch in either an up-trending market or a falling market, but the share price of ITC has risen by over 32% in one year.

The company’s stock has been rising at a time when shares of many consumer firms have been hammered. Shares of ITC Ltd continued the uptrend with the stock rising to a 3-year high in Monday’s early session as it was up over 2% to 290, its highest level since 2019. From being a dull performer in the past few years, the stock has outperformed in 2022 so far as it has rallied more than 32% during the period as compared to about 11% fall in benchmark Sensex.

Technical View

In the daily time frame, ITC Ltd. share prices are moving in the form of Impulse wave pattern. As per Elliott wave theory, there is a clear impulse rise as shown on the daily chart. Primary stage of wave 3 is ongoing on upside. After completion of wave 3 , we can see a correction in stock near 265 level which will be wave 4. At that point stock is expected to resume its upside gain in the form of wave 5.

As the chart looks attractive for the short term, one can initiate buy and accumulate this stock near current levels. If we take projection of Fibonacci retracement then there is a possibility of seeing the target of 300 in coming days which is 161.8% projection level of Fibonacci also the target of wave 3.

The Nifty index has corrected more than 17% from it’s all-time high of 18,604 in October 2021.Previous week was the worst-performing week for the Indian equities in the recent past, the benchmark indices suffered deep losses before ending the week on a very fractured note. In this week we have seen technical pullback in the market but failed to sustain above 15700 levels. Bears returned to Market again as benchmark indices opened on negative note on 22nd June with Nifty Index below 15600 levels.

The pattern analysis suggests that the NIFTY is now below most of the key moving averages. It is moving towards a falling trend line resistance level. This trend line is drawn from the low point of 16410 and joins the subsequent lower bottom. Overall, unless there are fresh positive triggers, it is expected that the markets may continue trading lower. Now in this scenario the NIFTY might stay in the range of 15,000 – 15,700 in the coming days. If the selling pressure continues, as per technical support and analysis, 14,185 could be possible where bottom to bottom trendline level presents. Given this pattern, it would be crucial to see if the NIFTY is able to defend the 15200-support zone over the coming days.

BANKNIFTY

The Bank Nifty extended losses for the third consecutive week and closed sharply lower by 5% at 32743 levels. The volatility remained immense given the number of uncertainties that surrounded the happenings around the world. The weekly price action formed a strong bear candle carrying lower high-low, indicating acceleration of downward momentum. The banking index is already moving below trendline support indicating more weakness in the coming sessions. The levels of 33600 and 33750 are likely to act as potential resistance points. The supports come in at 32150 level. If Index violated this support, prices dragged towards Fibonacci next support, which presently stands at 30440. A highly selective and stock-specific approach is advised for the coming weeks.