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Corporate Report

Published on: May 30, 2022, 1:46 p.m.
Eveready on a recharging mode
  • Eveready: the country’s largest producer of dry cell battery; Photo: Sajal Bose

By Sajal Bose. Executive Editor, Business India

After keeping everyone guessing over last two years, the Burman family of Dabur India is set to take management control of the country’s largest dry cell battery maker, the BM Khaitan family-owned Eveready Industries Limited. “We believe that the brand Eveready has great potential and all it needs is some push and direction. As the largest shareholder, we hope to provide that fresh impetus and direction to the company, going forward,” says Mohit Burman, vice chairman, Dabur India Limited. He initiated the family’s move in Eveready.

The Burmans are today the largest shareholder of Eveready, at over 23.36 per cent, whereas the shareholding of the Khaitans (the original promoter shareholders) was down from 44.20 per cent in FY2019 to 4.90 per cent at present. The steady decline of the Khaitan’s holding is due to their shares being pledged to the bank to borrow funds for the group’s engineering company McNally Bharat Engineering, a pure misadventure now costing the Khaitans their Eveready ownership.

SEBI nod

The Burmans have moved closer to becoming the sole promoters of Eveready. On 24 May, they received regulatory approval from SEBI for the open offer to public shareholders of Eveready for an additional 26 per cent stake of the company for Rs604.75 crore. The offer will open on 3 June and close on 16 June at a price of Rs320 per equity share of Eveready. The Burmans have appointed JM Financial to manage the issue. The current share price of the company is Rs315.

Five Burman family-run investment firms came out with the open offer. JM Financial submitted the offer letter to stock exchanges on behalf of Puran Associates Pvt Ltd (‘Acquirer 1’), VIC Enterprises Pvt Ltd (‘Acquirer 2’), MB Finmart Pvt Ltd (‘Acquirer 3’), together with Gyan Enterprises Private Limited (‘PAC 1’) and Chowdry Associates (‘PAC 2’) – to acquire shares.

The open offer document filed by JM Financial stated that the prime objective was to have a substantial holding of equity shares, voting rights and acquisition of control of the target company. Pursuant to the offer and the purchase order, the acquirers and PACs will acquire control over the target company and the acquirers and PACs shall become the promoters of the target company, including in accordance with the provisions of SEBI (LODR) regulations.

The letter also mentioned, ‘currently the acquirers do not have any intention to dispose of or otherwise encumber any assets or investments of the target company or any of its subsidiaries, through sale, lease, encumbrance, reconstruction, restructuring or otherwise, other than in the ordinary course of business.’

A company insider speaking on condition of anonymity, says: “The Burmans will successfully pick up an additional 26 per cent stake from the market. They will put Eveready back on the right track. With the Burmans having stepped in, the mood of employees has turned upbeat now.” The company presently employs 2,300 people. 

The Burmans have made a smart move. Ever since the Khaitans pledged their share for funds, Burman group companies have been scooping up Eveready shares from the market. Earlier in February, JM Financial was mandated by the Burmans to buy more shares from the market. It then announced its intention for an open offer. It also asked for a three-board position post the open offer in Eveready.

The Burman family currently holds 23.36 per cent share in Eveready. “We like our companies to be run professionally. The Burman family is not going to be in any executive capacity. We generally run our businesses professionally and our intent is to run Eveready too in a similar fashion,” says Burman.

  • Mohit Burman: Eveready needs some push and direction

    Mohit Burman: Eveready needs some push and direction

Burman-owned Dabur India started its journey from Calcutta. The family later shifted to Delhi. The 137-year-old Dabur is one of the leading FMCG companies in the country. The Burmans have successfully transformed themselves from being a family-run business to become a professionally managed enterprise.

New leadership

On receipt of the public announcement at the end of February, in relation to the open offer by the Burmans, Aditya Khaitan and his nephew Amritanshu Khaitan tendered their resignation from the board as non-executive chairman and managing director of the company on 3 March, 2022.

In a touching letter to board members Amritanshu Khaitan mentioned: “As the largest shareholder of the company, the Burman family have expressed their interest to take management control of your company and give new leadership and direction to the company. It would be appropriate for me to step down from the board. I will continue to be a long-term stakeholder in the company and participate in the future growth plans of the company.” He also thanked the entire Eveready family for enriching his career with many unforgettable experience and moments.

Later, on 8 March, the Eveready board appointed Suvamoy Saha, 63, as the new managing director of the company with the consensus of the Burman family. With 37 years of experience in corporate management in diverse fields, both in India and abroad, Saha became joint managing director of Eveready in August 2021. This is the first time the Khaitans are not present on the board after they acquired Eveready (the erstwhile Union Carbide India Ltd).

The Eveready promoter Khaitan family had borrowed heavily by pledging their shares in Eveready and their tea company McLeod Russel, to save the group’s ailing engineering company McNally Bharat, engaged in turnkey solutions for infrastructure projects. An industry insider thinks some key senior management people who had been running the day-to-day affairs of McNally Bharat misguided Aditya Khaitan.

They painted a rosy picture of the EPC industry and the overambitious Khaitan trusted them and felt that infra could be the next business and growth for the group, and started funding. It finally turned out to be bad business judgment and dragged down the entire BM Khaitan group.

“It was the wrong decision to fund McNally and their unviable projects and this landed the Khaitans in big trouble. It was stupidity,” recalls a senior person in Eveready. McNally has been now admitted into the corporate insolvency process. The lead creditor, Bank of India, moved the petition to start the insolvency process against the company.

After Deepak Khaitan died, the former chairman and managing director of Eveready, his son Amritanshu, became the managing director of Eveready. According to sources, Amritanshu told his uncle Aditya to take a one-time hit and put McNally Bharat up for sale. But Aditya disagreed and kept pumping money into it. And in 2016-17 Eveready’s shares were pledged to raise R600 crore. Sources say Amritanshu still repents not being able to block the decision, which was taken when the founding patriarch BM Khaitan was still alive.

  • Aditya and Amritanshu Khaitan tenderd their resignation from Eveready board; Photo: Sajal Bose

Family dispute and a shelved deal

Also, a few years ago, the Khaitan family had taken a call that they would sell Eveready and retain MRIL. Several MNC battery manufacturers including Duracell showed interest. The Group had shortlisted Duracell Inc, owned by Warren Buffett’s Berkshire Hathaway. A person who had knowledge about the deal said that it was fixed at around Rs1,700 crore.

Duracell had started due diligence of Eveready’s battery and flashlight business including the manufacturing plants and distribution network. Unfortunately, during the process, BM Khaitan died. The deal was shelved because a family dispute surfaced. The dispute continues and sources say relations between uncle and nephew are strained.

People blame the Khaitans for the company’s downfall. However, nobody ever questions their intention and integrity. It was just a bad decision which caused a decline in the Group’s fortunes. The family is well known for their culture, inherited from BM Khaitan. They are considered good employers, generous and have tremendous respect for people.

“I have not seen a better person than BM Khaitan in my life. He was a true visionary. It is good that BM Khaitan did not live to see the empire he had created collapse due to mismanagement and family feuds. The Burman group is a professionally managed company. They will run it well,” says a well-known person in the city’s corporate circles.

“Promoters cannot flow funds and give guarantees between group companies in isolation. Inevitably the downfall of one will have repercussions on the other. Emami, Zee, Britannia are some examples. Some have navigated well and some have seen promoter stake sale, dilution, etc when the tide turned. But appropriate action against any irregularities is must.” says Pankaj Singhania, founder, Lake Water Advisors, an equity research firm.

“Taking charge of Eveready is a shot in the arm for Burman. Dabur’s large distribution network could be leveraged. The battery business is a very competitive segment, though, so we have to wait and see how the Burmans handle the situation,” adds Singhania. 

Eveready is the largest player in India with regard to dry cell batteries and flashlights – they have a market share of over 50 per cent in both categories. The company has six manufacturing units across India which produce 1.3 billion batteries. All the units are backed by integrated management systems with the latest versions of ISO accreditations. The plants maintain the highest level of environmental standards.

Market leader

Eveready has a strong brand value with a robust distribution network. Out of the total FMCG universe of about 8.5 million outlets, battery stocking comprises around 53 per cent. Eveready batteries were stocked in 70 per cent of such outlets – higher than any other battery brand by a wide margin.

Eveready achieved annual sales of Rs1,206.75 crore in the financial year ended March 2022 as against Rs1,248.98 crore the previous year. The net profit recorded was Rs47.84 crore in FY22 against a loss of Rs307.45 in FY21. The current debt of the company is Rs350 crore.

  • Saha: the new man in charge

    Saha: the new man in charge

The Indian dry cell battery market is now estimated at Rs1,500 crore and growing at 5-6 per cent. The battery category benefitted from a generation of healthy demand coupled with a decline in the import of poor-quality products from China post the implementation of BIS standards. The market segment pattern underwent changes during the past several years as consumers shifted from the more expensive ‘D’ size batteries to ‘AA’ sized ones.

The consumption of batteries is driven by growth in the offtake of its applications. A growing need for portable power and the advent of a number of battery-operated gadgets like remotes, toys, clocks, and torches have catalysed consumption. Since these gadgets are used on an everyday basis, batteries have enjoyed a non-cyclical demand. Also, the rural segment is a high growth one for the industry.

The Burmans have appointed Bain & Company to advise on the future road map for Eveready. “We plan to focus on its existing businesses in the immediate future and then look at new businesses in the medium to long term, both in batteries and in some new categories too,” says Burman. “We are expecting their reports in the next 2-3 months.”

The Burmans think whatever happened earlier in Eveready is past history. Now they want to start afresh. Can one safely say this is a cat with nine lives? 

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