InvestorQ : How did Khaitans lose control of Eveready Industries to Burman family?
Dawn Cherian made post

How did Khaitans lose control of Eveready Industries to Burman family?

Mitali Bhutta answered.
2 weeks ago

During the week gone by, there were some interesting developments on the Eveready front. The Burman family, that owns Dabur, added 14.3% stake in Eveready to take their total stake to 38.3%. In short, Eveready Industries which was once the crown jewel of the Khaitan group has now been ceded to the Burman family who have become the controlling shareholders of Eveready and Khaitans have also lost their promoter status.

Here is a quick background of how it happened. It began with the troubles at two group companies of Khaitan group viz. McNally Bharat and McLeod Russell. While the former was an infrastructure company, the latter was a tea company, but the common point was that both were deep in debt. They had reached a point when McNally Bharat and McLeod Russel could not pay their debts and pressure was mounting for the Khaitan family. That is when the Khaitan family decided to pledge shares of Eveready to secure the loans.

The first signs of the problem were evident when Yes Bank went to NCLT to declare McLeod bankrupt. The turning point was when Aditya Birla Finance decided to sell the pledged shares of Eveready in the open market to recover the dues. The Khaitan family which owned more than 22% stake in Eveready, ended up with just 4.9% stake. During this price damage, the Burman family intervened and mopped up a sizable stake from the market. The idea was to give the Khaitan family a chance to retail ownership of the group.

However, over two years as the Khaitan family could not muster funds to take back the stake, the Burman family moved in to take over the management of the company. Subsequently, the Burman family appointed JM Financial to increase the stake in the open market and also made open offer to the shareholders of Eveready. This helped them to increase their stake in Eveready to 38.3% giving them effective control and the Khaitans losing management control.