Minority shareholder says he is willing to revise ‘open offer’ price
When Pramod Jain, a minority shareholder in the Sanjay Dalmia-controlled cigarette-maker Golden Tobacco Ltd (GTL), made a hostile bid to acquire another 25 per cent equity in the company at Rs 101 a share, the stock markets took notice. The GTL stock surged 5 per cent on the Bombay Stock Exchange, the maximum permissible rise in a single day, for two successive days to close at Rs 114.85 today.
Why does Jain want to take over a debt-ridden tobacco company which has cigarette brands like Panama and Chancellor?
“Golden Tobacco is also an asset-rich company. It has a property in Mumbai worth around Rs 500-700 crore. The current market capitalisation of the company, however, is slightly over Rs 200 crore. So, I get a leverage of over Rs 400 crore. Besides, GTL has a tobacco licence, which is valuable,” says Jain.
If the open offer is successful, Jain plans to “restructure the company, or probably even get some multinational interested in it”. However, if the open offer fails, Jain says he will go back “to doing what I’m currently doing”.
Jain’s group company — Parinidhi Ventures — has a turnover of around Rs 200 crore, says Jain. It comprises four divisions — the telecom business, which is around Rs 60 crore (handling inbound traffic), which Jain plans to sell soon.
“In fact, had I not made this offer, the deal would have already taken place,” he says.
The other divisions comprise his government (EPC construction) and real estate businesses and the investment division Parinidhi Holdings (around Rs 95 crore).
Jain insists that he has “sufficient capital” to cater to the open offer, but does not want to give any details. But the stock price has risen, and is expected to rise further, since he made the offer.
“I will revise the offer price if needed but will wait for the market to first find its own level. Remember, there can be many scenarios that could emerge meanwhile. For instance, there could be a counter offer, or even the possibility of a joint management. Anything could happen,” he says.
Jain currently has a 6.47 per cent stake in GTL. Reacting to reports which quote Sanjay Dalmia as saying that he does not have any stake, he says: “How does it matter? I have publicly stated so in an advertisement. He should come clean, too.”
The promoter’s holding in GTL, according to BSE data, was 27.19 per cent as on September 30. However, Dalmia, according to sources close to the development, had raised funds from Indiabulls by pledging his shares in GTL and Gujarat Heavy Chemicals (GHCL). Dalmia’s voting rights had also been suspended by the court.
“I have documents with me to show that Dalmia has a legal shareholding of just 8.5 per cent, since nearly 18.5 per cent of his holdings have been restrained by the Delhi High Court on November 3 by Indiabulls, which has made a claim of Rs 293 crore. This makes my task easier,” says Jain.
When asked to comment on the company’s rights being suspended by the court, Dalmia’s company declined to say anything.
But is Pramod Jain making this ‘open offer’ since his friendship with Dalmia had gone sour? Jain said: “We never had a great friendship to begin with. The first time we met was in Kolkata late last year during the company’s extraordinary general meeting.”
But Jain did have a stint at GHCL. “Yes. I was a director there but just for three-four months. And that, too, I believe retrospectively, was a ploy to have me to prevent a hostile bid.”
And what about the rumours of Jain making a hostile bid himself on GHCL? “What can I say about rumours?” quips Jain, who still hold a 5 per cent stake in GHCL.
