Kolkata: India’s biggest sugar maker Bajaj Hindusthan Ltd’s attempt to buy the founders’ 36.67% stake in nearest rival Balrampur Chini Mills Ltd ended on Monday, capping weeks of discussions, according to people advising the companies on the transaction.
“Though Kushagra (Bajaj) and Vivek (Saraogi) had reached an agreement on valuation, the deal could not be concluded because they could not agree on certain other important terms,” said one of the people, who declined to be identified.
Kushagra Bajaj is Bajaj Hindusthan’s joint managing director and Vivek Saraogi is Balrampur’s managing director.
Bajaj and Saraogi met several times in Kolkata and Mumbai on Sunday and Monday to resolve differences but failed. “I think mistrust between the two companies scuppered the deal,” the person said.
Saraogi’s stake in Balrampur is not on the block anymore, said a close associate, who also refused to be named. “It’s business as usual for Vivek again.”
Though Saraogi declined comment, his company told stock exchanges that “some discussions were held” with Bajaj Hindusthan “on future business strategies”.
Bajaj Hindusthan also said in stock exchange filings that its board did not consider any proposal to acquire shares in Balrampur. The company’s spokesperson said he had nothing to add to what his company had told the bourses.
On Tuesday, Balrampur’s shares fell 10% from Monday’s close to Rs134.30 each on the Bombay Stock Exchange, while Bajaj Hindusthan’s share rose marginally to close at Rs196.55. The benchmark Sensex index fell 3% to 15,405 points.
Saraogi had agreed to sell his family’s stake in Balrampur because Bajaj Hindusthan had offered a “good valuation”, his associate said. “What’s more, he wanted to resolve all outstanding disputes with Kushagra, his key competitor, and live in peace... But that was not to be.”
Balrampur runs 10 mills in eastern Uttar Pradesh. Bajaj Hindusthan owns 14, four of which are operated through a subsidiary. Bajaj Hindusthan would have become the world’s second largest sugar producer if it had acquired controlling equity interest in Balrampur.
“It would have been difficult for Bajaj Hindusthan to fund the acquisition because it is already indebted to the tune of Rs2,500-2,700 crore,” said a stockbroker who tracks the sugar sector. He spoke on condition of anonymity.
Bajaj Hindusthan would have had to shell out in excess of Rs1,500 crore for Saraogi’s 36.67% stake and at least an additional Rs1,000 crore on the open offer that the transaction would have triggered under Indian takeover laws, the stockbroker said.
In the year ended 30 September 2008, Balrampur had earned Rs97 crore in net profits on a net revenue of Rs1,475.56 crore. Its revenue in the nine months to June at Rs1,324.62 crore was 25% higher than the year-ago period. Net profit till June more than doubled to Rs183.78 crore. Sugar producers count their accounting year from October.
Though bigger in terms of production capacity, Bajaj Hindusthan had posted a net loss of Rs50 crore in the fiscal till September 2008 on a turnover of Rs1,794.35 crore.
In the nine months ended June, it earned Rs85.53 crore in net profit on a revenue of Rs1,277.5 crore, which was 3.6% lower than the same period last year.