Why has the Dabur family picked up additional stake in Eveready Industries?

The Burman family, which owns Dabur, has bought an additional 0.28% in Eveready Industries taking its cumulative shareholding in Eveready Industries to 20.68%. The acquisition of these shares has been done by JM Financials, on behalf of 5 holding companies of the Burmans. This is part of the 5.26% that JM was mandated to buy.

When the mandate was given to JM in February 2022, Burmans were already holding 19.8% in Eveready Industries. The Burman family has also, meanwhile, made an open offer to the minority shareholders of Eveready for an additional 26% stake as required under SEBI norms. Eveready was owned and run by Khaitans, before they lost control of the company.

There is an interesting background to this episode. Khaitan group had pledged shares of Eveready Industries to raise loans and bail out its two other businesses viz. McNally Bharat and McLeod Russell. When the Khaitans could not repay the loan, the banks had sold off the shares in the open market due to which Khaitan group becoming a nominal shareholder.

At that point, Dabur group had come to the rescue by warehousing the shares from the market and allowing the Khaitans to continue to run the business. Of course, this leeway was given based on a time bound assurance of deliverables by Khaitan group. After 2 years, the Burmans had decided that they would take full control of Eveready management.

Eveready also has business level problems. The flashlight category continued to suffer due to dumped imports from China. Bain & Company is advising Eveready on improving operational efficiencies including urgent cost rationalization. Late last year, nominees of the Khaitan family stepped down from the key board positions and made way for Burmans.

For Q4, Eveready reported net loss of Rs.38.39 crore in Q4, although losses have sharply narrowed. Revenues also fell 11.5% yoy. The overall business is being hit by weak demand and input cost inflation. It remains to be seen how the Burmans plan to turn around the floundering business model of Eveready Industries.