Kolkata: Facing a hostile takeover from health and personal care product company Emami Ltd, the Parikh family, which co-founded and manages Zandu Pharmaceutical Works Ltd, has started ramping up its stake in the herbal health care company by buying shares in the open market.
Zandu’s directors Ajay K. Parikh and Girish G. Parikh bought 3,416 shares of the company on 13 June at an average price of Rs12,344 a share, according to the firm’s filings with the Bombay Stock Exchange, or BSE, on Friday. These purchases were reported since Ajay and Girish are directors of the firm, but other family members, too, have raised their holdings.
“We, as a group, are buying. Our family has unanimously decided not to sell out (to Emami),” said Bhaskar G. Parikh, one of the identified promoters of Zandu. The Parikhs own 18% of the company’s equity capital, data available with BSE’s website shows.
Ajay K. Parikh bought 1,666 shares for Rs2.04 crore, while managing director Girish G. Parikh bought 1,750 shares for Rs2.17 crore. The family has asked Girish G. Parikh to devise a strategy to defend its interest. Ajay K. Parikh said he had given the managing director the so-called “power of attorney”—a legal undertaking—to freely decide and execute a strategy to protect his interests in the company.
Calls made by Mint to Girish G. Parikh went unanswered.
The Parikh family’s erstwhile partner and co-founder of Zandu, the Vaidya family, sold its 24% stake in the company to Emami for Rs6,900 per share. This sale was disclosed to the National Stock Exchange on 30 May. The buyout triggered an open offer for 20% more of the company’s shares—mandated under India’s takeover laws—which Emami priced at Rs7,315 per share, Rs2 more than the highest price it paid to buy shares from the stock market.
Emami, which amassed 3.5% stake in Zandu through stock market transactions before buying the Vaidya family’s stake, now owns 27.5% of the company.
The Parikhs could have made a counter-bid to raise their holding in the company, for which they have time till 23 June, but it’s unlikely they are going to do so. “We preferred to buy shares from the market; that’s our strategy,” Bhaskar G. Parikh told Mint.
Earlier this month, the Parikhs had proposed to subscribe to a preferential allotment of shares by the company, but independent directors of Zandu spiked the proposal. Emami, too, had challenged the plan to allot shares to Zandu’s promoters, saying it was not in the interests of other shareholders in the company.
Kolkata-based conglomerate Emami, which has interests in real estate and fast moving consumer goods, doesn’t want a no-holds-barred fight for the control of Emami. Its chairman R.S. Agarwal said on Friday his company was talking to the Parikh family to find a way to resolve all outstanding issues in an “amicable manner.”
His son Harsh Agarwal, who is a director of the company, had earlier told Mint that Emami was willing to pay a “control premium” to the Parikhs.
Zandu’s announcement of share purchase by its directors explains the unusual rise in the company’s share price. Since Emami’s open offer was announced on 2 June, the price of Zandu’s shares zoomed past Rs15,000 from around Rs8,000 at the beginning of the month. It closed at Rs14,136 on the National Stock Exchange on Friday.