InvestorQ : Is it true that the Burmans of Dabur are also investing in Eveready Industries of the Khaitan group?
diksha shah made post

Is it true that the Burmans of Dabur are also investing in Eveready Industries of the Khaitan group?

9 months ago

Dabur promoters, the Delhi based Burman family, already is the single largest shareholder holding 20% stake in Eveready Industries Ltd. Now it plans to become joint promoters with the Khaitan family, who were the original promoters of Eveready Industries. After a recent spate of lenders selling of pledged shares of Eveready Industries, the stake of the Khaitan family plunged from 44.1% a couple of years back to just 4.5% after a payment default.

The Khaitan family had their holdings in Eveready and McLeod Russel India to avail of loans and to repay the debts of McNally Bharat Engineering. In last August, the shares of Eveready pledged by Williamson Magor were also sold by IndusInd Bank leading to further dilution of stake of the Khaitan family in the Eveready group. This sharp fall in promoter holdings in Eveready opened the company to the distinct risk of become a hostile takeover target.

That is when the Burman family of the Dabur group stepped in as a white knight to buy the shares from the open market to avert such a possibility. Both Burmans and Khaitans have their early origins in Kolkata and have shared a long and healthy relationship. It is anticipated that if the Burmans and Khaitan family emerge as joint promoters and run Eveready together, a hostile takeover can be staved-off for now, if not fully prevented.

The SEBI Takeover Code will entail the Burmans enhancing their stake in Eveready but apparently the Burmans are open to buying more shares from the open market to increase their stake. The Khaitan family is not keen to sell their stake as they would prefer to maintain their stake at current levels rather than totally giving up control. That is the reason the two families are exploring becoming joint promoters of Eveready.

It is likely that once they become joint promoters, both the Burmans and the Khaitan family may get a place in the Eveready board. Burmans, despite having a 20% stake, do not exercise any form of management control over Eveready and would obviously try to get more involved in day-to-day affairs with a say in management decision making.

Burmans have stayed off buying more stock due to the high price. If the Burmans buy Eveready from the market and take their stake beyond 25%, a mandatory open offer will be triggered. In that case, the Burmans will need to make an open offer to buy at least 26% additional stake from the public shareholders at the prevailing market price and the Burman family is not keen at this point of time. They would rather wait for an appropriate price.