Harish Bhasin died on December 7. He had started out as a stock broker in Delhi and later diversified into mergers and acquisitions, mutual funds, hospitality and real estate. His other claim to fame was that he was a key player in the first hostile bid from overseas for Indian companies. In the mid-1980s, London-based non-resident Indian (NRI) Swraj Paul had bid for Escorts and DCM, and Bhasin was his man in Delhi.
It proved to be a turning point of sorts for Indian businessmen. They had been badly exposed by Paul and Bhasin. Hostile takeovers were not the norm in the country. Banks — and all the large ones had been nationalised — did not have it in their charter to lend for such adventures. Punitive rates of taxation meant most businessmen ran their companies with very low shareholding. What compounded the problem was the infamous conversion clause — state-owned financial institutions could convert their long-term loans into equity. Businessmen slept comfortably in the thought that, given the influence they could wield in the government, there was no way the financial institutions wouldn’t support them in such an eventuality.
There was thus a time when the Birla family owned more of Tata Steel than Tata Sons, the promoter of the company. Escorts and DCM were sitting ducks for Paul. Har Prasad Nanda ran Escorts with just 15 per cent stake, while the Shriram family owned 16 per cent of DCM. Escorts and DCM shares had been rising sharply for months together, but nobody had a clue who was buying. The needle of suspicion first pointed towards Ram Prasad Goenka, the original takeover tycoon. It was only when Bhasin said that these shares were being “exported” that the reality dawned on Nanda and the Shrirams. There was also a buzz that Mahindra and Mahindra and some Tata companies were next on Paul’s radar screen because of the low promoter stake.
There are many theories why Paul targeted these two companies. One is that they owned a lot of real estate. The other was that somebody in one of the two companies had rubbed somebody in the highest echelons of power the wrong way. Paul, of course, was in the good books of the then Prime Minister, Indira Gandhi. Whatever be the reason, the battle ended after some hectic lobbying. Nanda argued that Paul had misused the liberalised investment norms for NRIs. Bharat Ram of DCM went to Manmohan Singh, who was then the governor of the Reserve Bank of India (RBI), and pointed out that there were clear guidelines that money from abroad could not be brought in for a takeover.
The target companies also lobbied with Rajiv Gandhi. That he had gone to Doon School with the children of some of the country’s top businessmen helped. They told him that such a hostile takeover was not permitted under the rules of the Controller of Capital Issues or RBI, and that it was being done, in a sense, illegally. Gandhi went into it in great detail and made a statement in Parliament that the country needed to be very careful about takeovers, especially when the bids came from outside the country.
That was when the tide began to turn against Paul. A cap of 5 per cent was put on NRI stake in any Indian company. This checkmated the predator. He then came to the negotiating table and settled the issue with Nanda and Bharat Ram. Most businessmen had learnt the lesson by then and quickly began to reinvest all their money to ramp up their stake. The government, in the meantime, saw the futility of high tax rates and consequently gave a breather to businessmen. That helped them secure their businesses. Shares scattered with distant relatives, who could be fence sitters in a takeover, were bought and consolidated.
But that was not the end of the matter so far as Bhasin was concerned. After the Paul affair got over, he still owned around 7 per cent of DCM. And when the DCM family split three ways in 1990, he owned the same amount of the splinter companies. In at least one of the companies, DCM Shriram Consolidated, he was bought out by the promoters, brothers Ajay and Vikram Shriram. The matter was settled amicably; the two parties sat across the table, agreed on a price and inked the deal.
And in at least one another company, DCM Shriram Industries, he fought another battle with the promoters, Tilak Dhar and brothers. (The company is into sugar, alcohol, chemicals and rayon.) His HB Stockholdings owned 12.87 per cent of this company. Through open market purchases and an open offer, he raised the stake to 27.45 per cent. Alarmed at it, the promoters upped their stake from 32.54 per cent to 40.7 per cent after the company issued them warrants. Bhasin then approached the Company Law Board (CLB) on the ground that the issue was against the interests of the minority shareholders. Tilak Dhar and brothers, on their part, alleged that Bhasin’s open offer violated the takeover code of the Securities and Exchange Board of India (Sebi). This was in 2007 and 2008. The matter is since then stuck in Sebi and CLB.
