Burman family may get joint promoter status at Eveready
The Burman family, the single-largest investor in Eveready Industries Ltd with a 20% stake, may become joint promoters of the battery maker along with the Khaitan family, two people familiar with the talks between the two groups said.
The shareholding of the Khaitan family plunged to just 4.5% from 44.1% over the past year as lenders sold shares of Eveready pledged with them after the promoter group defaulted on payments.
The promoter group pledged their holdings in Eveready and tea producer McLeod Russel India Ltd to avail of loans and repay debts of McNally Bharat Engineering.
Last August, Eveready’s shares, held by Williamson Magor (an Eveready promoter entity), were pledged with IndusInd Bank for securing the outstanding dues of Seajuli Developers and Finance Ltd, the borrower company. The bank invoked the pledge held in the Eveready shares for the recovery of its dues from Seajuli.
The dramatic decline in the promoter holdings in Eveready opened the dry-cell battery maker to the risk of a hostile takeover. As lenders invoked pledges, the Burman family, which runs Dabur Ltd, stepped in as a white knight to buy out the shares from the open market to avert such a possibility.
“Burmans and Khaitans have an age-old relationship. If the Burmans and Khaitans become joint promoters and run the company together, a hostile takeover can be prevented. That’s why this is one of the options under consideration by both the parties,” said one of the two people cited above on the condition of anonymity.
An Eveready spokesperson said the company does not comment on speculative news.
“After a year of discussions between the Khaitans and the Burmans, the two families are considering an option to jointly control the group,” the person said.
According to the market regulator’s takeover code, the Burmans will need to launch an open offer for Eveready shares if the family becomes a part of the promoter group.
“The Burmans are open to buying more shares from the open market to increase their shareholding rather than buying the stake from the Khaitans. The Khaitans are keen to maintain their stake at the current levels and are averse to the idea of giving up control. That’s why the two families are considering the option of becoming joint promoters of Eveready,” the person said. As a part of the joint management control strategy, Eveready is likely to restructure its board and become a professionally run company, the person added. Currently, both Eveready’s managing director and the chairman are from the Khaitan family.
“The company, post the creation of joint management control, may appoint the Burmans and the Khaitans as board members among others, along with a few new independent directors,” said the first person.
A spokesperson for the Burman family said, “We are the largest shareholder in Eveready with around 20% stake. However, neither do we have any board seat currently, nor have we sought a seat on the board of Eveready. Also, we are not currently contemplating any open offer.”
Earlier, the Burman family was planning to boost its stake in Eveready, but called off the plan after the stock price jumped 2.7 times in the past year. The surge in share price is largely on hopes that there would be an open offer in which public shareholders will be able to tender their shares if there is a hostile takeover or if the Burmans become the promoters of Eveready.
The Burman family has been refraining from increasing its stake in Eveready due to the high stock price. If the Burmans purchase Eveready shares from the market and increase their stake beyond 25%, a mandatory open offer will be triggered as per the takeover code under the Securities and Exchange Board of India. If such an open offer is triggered, the Burmans will need to offer to buy at least a 26% additional stake from the public shareholders, almost at the prevailing market price.
In a December 10 report by The Telegraph, Mohit Burman, vice-chairman of Dabur India, said, “(We will buy) at an appropriate price…not at this price!”