Kolkata: Nearly a century after its founding, herbal health care company Zandu Pharmaceutical Works Ltd was unable to cope with competition, and that—according to Devkumar Vaidya, great grandson of the founder—forced him and his sister Anita to sell their 24% stake in the company to Emami Ltd.
Breaking his silence for the first time since he sold the stake to the Kolkata-based conglomerate two months ago, Vaidya told Mint in an exclusive interview that selling his stake to the Parikh family—his erstwhile partners, who now manage the company—would not have benefited Zandu and its shareholders.
“The growth in the industry has been far greater than Zandu’s growth…To sell the stake to my partners would not have achieved the desired result—which was to introduce the dynamics of Emami for the growth of Zandu in the way it should be growing instead of the way it was,” Vaidya said in an email interview.
The sale of shares triggered a fierce takeover battle and the Parikh family, which is in no mood to share management control with Emami, has moved the securities market regulator, Securities and Exchange Board of India (Sebi), claiming they had right of first refusal on the shares. But Vaidya denied this: “As far as right of first refusal, I am not aware of any such document.”
Breaking silence: Devkumar Vaidya at his residence in Mumbai. (Abhijit Bhatlekar / Mint)
About the Parikhs, Vaidya said, “They were certainly not enemies, but came from a very different school of thought. Being a Parikh or a Vaidya certainly doesn’t give you licence to run the company.”
Vaidya, an aeronautical engineer who turns 43 in October, continues to be an employee of Zandu, which was founded 98 years ago. He hasn’t quit and says he won’t unless asked. “For the past three years, no role was assigned to me,” said Vaidya, whose family was slowly ousted from the management of the company. “Our control over Zandu weakened when my grandfather died. My father was only 17 years old at that time.”
When some seven months ago, Vaidya and his sister decided to sell their stake in Zandu, they met the management of Emami separately in Kolkata to assess them. “We had offers from almost all major companies in the Ayurveda industry, but impressed with their dynamism and success in professionally running a family-controlled business, we zeroed in on Emami.”
Though Vaidya and his sister sold out, some of their very close relatives, who together continue to hold around 5% of Zandu’s shares, didn’t. Emami and the Parikhs are fighting to secure their support in the ongoing takeover battle. Though it’s not known who they would support or eventually sell out to, if at all, Vaidya said: “Our exit to Emami will give our relatives better value for their shares. Just because we chose to do something doesn’t mean someone else has to do the same… once Emami completes everything, my relatives will get far greater value for their shares than we have got.”
Vaidya and his sister sold out their combined stake of 24% for Rs6,900 a share, but the current market price of Zandu’s shares has gone up to Rs18,214 apiece (its closing price on the National Stock Exchange on Friday). But the managements of Zandu and Emami both agree the abnormal spurt in the share price is a consequence of speculators’ interest in the company’s shares.
Zandu’s managing director Girish Parikh was not available for comment. Calls made to his cellphone were not answered or returned.