After failing to revive the business for years, the Kolkata-based Khaitan family may finally have to part ways with Eveready Industries, the maker of eponymous batteries that are pretty much ubiquitous in India, and which once used to be the crown jewel for the diversified group. With the Competition Commission of India clearing the takeover bid by the Burman family, the beleaguered dry cell battery maker is now closer to having a new owner.
The Delhi-based Burman family, which already has interests across fast moving consumer goods (FMCG), quick service restaurant chains and financial services, has lined up five group companies and a financial advisory firm to take control of Eveready. While the Burmans already own 19.85 per cent of the company, three of their group entities Puran Associates Private Limited, VIC Enterprises Private Limited and M.B. Finmart Private Limited have been placed at the forefront of this deal as acquirers. Additionally, Gyan Enterprises Private Limited and Chowdry Associates are the persons acting in concert (PAC). These five together are expected to take 26 per cent shares of Eveready against Rs 605 crore. Further, JM Financial, which is managing the proposed deal, is also planning to take 5.26 per cent ownership on behalf of the Burman group.
According to Mohit Burman, Executive Vice Chairman of Dabur India and the man behind the deal, expansion of Eveready’s portfolio by leveraging the brand would be the key focus of the new management. “The brand Eveready is very strong and is a clear leader in the dry cell market. It’s also a very well-known consumer brand and we do like to invest in businesses like these. We believe that the brand has significant potential. We plan to focus on its existing businesses in the immediate future and then look at new businesses in the medium to long term,” he says, adding that with the right thrust and focus, the current business could be scaled up and new businesses explored. “The dry cell market today is around Rs 1,500 crore in size, but then there are segments within the industry like alkaline batteries that are growing very fast. We plan to go after that for sure, besides upgrading our range and focussing on lighting, too,” says Burman.
While the Burmans’ open offer for Eveready came only in late February, over the past few years, the family’s interest in the firm has grown steadily. It also coincides with the Khaitan family’s declining holding. Since the Kolkata-based family empire’s patriarch Brij Mohan Khaitan’s demise in mid-2019, the promoter holding in Eveready has dwindled from 44 per cent in March, 2019 to 4.84 per cent in December, 2021.
Burman, however, denies that the acquisition was planned or it was in understanding with the Khaitans, whom they know for decades. According to him, they “never intended to own or control the company initially. We only invested because we thought the business was cheap. There is no such understanding [with the Khaitans]. This is not a structured deal”.
While Aditya Khaitan and Amritanshu Khaitan, the former chairman and managing director of Eveready, respectively, who stepped down immediately after the Burmans’ open offer to acquire the company, declined to comment, people closely associated with its management told Business Today that the root of the problem lies in the Khaitans’ ambitious McNally Bharat deal. Acquired in 1980, the Khaitans owned 35 per cent of the infrastructure and mining solutions firm in FY14, but most of its shares were pledged against debt that it raised over the years. With its inability to realise revenue, the promoters had to initiate share sale to maintain liquidity.
Rising debt turned out to be a major concern for the owners, who eventually had to start selling assets to manage finances as sales in the battery business stagnated. Eveready, which used to contribute over 55 per cent towards the group’s revenue, has posted negative growth both in its top line and bottom line at least since FY17 (see chart). By 2018, analysts such as Kotak Securities started pinning their hopes on sale of key assets such as industrial land by Eveready.
Meanwhile, lenders’ intervention resulted in steady fall in the shareholding of the promoters. Take IndusInd Bank, for instance. In 2020, it invoked pledged shares—7.82 per cent in Eveready and 7.5 per cent in McLeod Russel. “Equity shares of Eveready Industries and McLeod Russel, held by Williamson Magor and Co (Khaitan Group entity), were pledged with the bank for securing the outstanding dues of Seajuli Developers & Finance Limited. The bank has invoked the pledge held on the aforesaid shares for recovery of its dues from Seajuli,” the bank said in a regulatory filing.
With the Burmans in charge, company insiders are now hopeful that Eveready has a fair chance of survival. “We have known them for years and, given the current circumstances when the Khaitan family can no more keep the control, it’s better that Eveready stays with the Burmans,” says a Khaitan loyalist.
Burman sounds confident too. Instead of running the business directly like the Khaitans, the family plans to scale up the business through seasoned professionals. “We like our companies to be run professionally. So, the Burman family is not going to be on the Eveready board in any executive capacity. We generally run our businesses professionally and our intent is to run this, too, in a similar fashion,” he says. That should be reassuring for Eveready’s stakeholders, considering the Burmans’ good track record with Dabur India.
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