Kolkata/Mumbai: Kolkata-based Emami Ltd, which is trying to take over Zandu Pharmaceutical Works Ltd, has approached estranged members of the Parikh family, which manages the herbal health care firm, for additional stake.
“All members of the extended Parikh family aren’t united,” said a director of Emami. “We have approached them with an offer to buy their stake in Zandu. We are keeping our fingers crossed.”
(NUMBERS OF NOTE) This person, who didn’t want to be named as the deal has not been clinched yet, declined to comment on the size of the stake held by the extended family.
Meanwhile, the management of Zandu has written to market regulator Securities and Exchange Board of India (Sebi), saying shareholders owning about 45% of the company’s shares have pledged their support to the present management, according to a person close to the company.
“The management has already written to the stock market regulator and to the stock exchanges that the total holding of the management is currently 45%,” the person said, but didn’t want to be named.
“This includes chief promoter Girish Parikh and family’s 17.8% stake and another 27.2% held by individual shareholders, who have committed their support to the management.”
The main Parikh family, which own 18% of Zandu, has approached friends and members of the extended Vaidya family, which continues to own about 8-10% of Zandu, though Devkumar Haresh Vaidya, his sister Anita Haresh Vaidya and their immediate families sold their 24% stake to Emami on 30 May.
“A firm offer has been made to the rest of the Vaidyas,” said a friend of the Vaidya family, who did not wish to be named. Emami, too, is eyeing these shares and has started negotiating, he added.
The Parikh family has been buying shares to reinforce its control on Zandu.
On Tuesday, Zandu reported to the stock exchanges that Kirit M. Parikh, Harendra M. Parikh and Kusum D. Parikh together bought 7,994 shares on 16 June for Rs11.6 crore, or Rs14,510 a share on average. Last Friday, Zandu said its directors Ajay K. Parikh and Girish G. Parikh bought 3,416 shares from the market, paying Rs12,344 per share on average.
The Parikhs have got a commitment for funding in case the Zandu management has to buy additional shares from the market at prevailing prices. They have already lined up a financial investor in case they need to buy more shares in Zandu from the market at prevailing prices, according to the person close to the Zandu management.
The Parikhs are also believed to have approached Pripan Invesment Pvt. Ltd, an investment firm belonging to the Ahmedabad-based Patel family, which founded and manages Cadila Healthcare Ltd, to acquire its 3.35% stake in Zandu.
Sharvil P. Patel, deputy managing director of Cadila, said he wasn’t aware of any negotiation between his company and the Parikh family. Pankaj Patel, chairman and managing director of Cadila, could not be contacted.
Bhaskar Parikh, a member of the Parikh family, also denied having approached Pripan Investment for its shares in Zandu. He had earlier told Mint that his family as a group had decided to buy shares from the market to tighten their grip.
Amid the scramble, the price of Zandu’s shares has been steadily going up. It closed at Rs15,317.55 on the National Stock Exchange, up 3% over Friday, while the bourse’s bellwether S&P CNX Nifty index closed 1.76% lower at 4,191 points.
Parikhs resorted to buying from the market after Zandu’s proposal to allot shares to its promoters under a preferential allotment was blocked by its independent directors.
The proposal, which was dicussed and dropped in the company’s board meeting on 6 June, was challenged by Emami, which said it wasn’t in the interest of other shareholders.
The other alternative was to make a counter bid, but the Parikh family chose not to so do. They had time till 23 June to announce a counter bid, but preferred to buy shares from the market as a strategy.
However, they might not be able to acquire more than 5% of Zandu’s shares in a year without making an open offer under Indian rules, which restrict creeping acquisition by promoters at 5% a year.
On the other hand, Emami’s open offer, which has been priced at Rs7,315 a share, is unlikely to get any response at all unless it revises the offer price, which is less than half the current market price. Speaking to Mint earlier, the company’s chairman R.S. Agarwal had ruled out matching the market price.
At the current market price, Zandu commands a market capitalization of Rs1,235 crore, which is more than seven times its turnover in the fiscal year that ended on 31 March. It is currently trading at 75 times its earning per share (EPS) of Rs204 in 2007-08, which makes Zandu an expensive proposition for Emami, which has so far spent around Rs160 crore to amass its 27.5% stake.
The Vaidyas, who sold out, parted with their 24% stake at Rs6,900 per share. Emami acquired 3.5% from the market, paying a maximum price of Rs7,313 a share.