Damani has reportedly reached out informally to N Srinivasan, India Cements’ controlling shareholder, to explore the option of a takeover.

Collage of Radhakishan Damani and N Srinivasan
Money Corporate Wednesday, June 17, 2020 - 16:37

Radhakishan Damani, the billionaire owner of Avenue Supermarts, which runs DMart supermarkets and the second richest man in the country according to Forbes, is mulling buying a controlling stake in India Cements, according to a report by Bloomberg. 

The report stated that Damani has informally reached out to N Srinivasan, India Cements’ controlling shareholder, to explore the option of a takeover. Srinivasan holds 29% of the company’s shares. It further added that Srinivasan is also looking at other investors to avert hostile bids. 

N Srinivasan is the Managing Director of India Cements. The company is the owner of the Indian Premier League team Chennai Super Kings, and Srinivasan was the former head of the Board of Cricket Control in India.

India Cements, which recently submitted its latest shareholding pattern for quarter ending March 2020 to the stock exchanges, showed that Damani, a prominent investor, and his family members have raised stake in India Cements from 4.73% at the end of third quarter of FY20 to just around 20% by the end of the fourth quarter FY20. The stake increase has been through purchase of shares from the open market.

Damani, who started off in 2002 with just one store, has been called ‘retail king’ after DMart’s Initial Public Offering (IPO) in 2017. DMart is said to have 214 stores today in multiple states. He is also an investor, and apart from India Cements, he reportedly has stakes in Gillette India, Nestlé India, VST Industries, United Breweries.

This comes full circle for Srinivasan, who, in 1998, made a hostile takeover for industrialist B V Raju’s Raasi Cements, and took over the company. The deal has been termed to be what was then one of the biggest ever acquisitions in Indian corporate history, as well as the first successful hostile takeover.  

Centrum Broking, in a research note in May when the shareholding pattern was announced, said that three possible scenarios can play out.

The first one being that the investment by the investor continues to increase (in this case Damani’s family) and reaches the threshold 25% which will trigger an open offer. SEBI’s rules mandate that any entity which buys a 25% stake in a listed firm will then have to make an open offer to buy an additional 26% for a controlling stake. 

In the second scenario, Srinivasan hikes his stake mid-30% including other strategic investment, which would then take the stake to the dominant holding levels of over 50%, in which cases he would hold on. 

The third scenario includes other strategic action by the promoters.

"These actions will keep the valuations higher except if the current investor remains to be a value investor as indicated by the management during our interaction," Centrum Broking said.

After reports of the takeover, the stock of India Cements traded up. The stock was trading up more than 6% at Rs 133.70. In early trade, the stock was up by more than 10%, and closed 4.72% up at Rs 131.95.

With IANS inputs

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