Kolkata: Amitabh Bachchan is no stranger to second innings. He resurrected a faltering acting career in 2000 with the film Mohabbatein and is now trying a business encore.
India’s most celebrated film star is shoring up his holding in AB Corp. Ltd—an entertainment and film production company he founded in the early 1990s—and is weighing the option of buying out minority shareholders in it.
That marks a reversal of strategy from a few years ago when AB Corp. was planning to sell new shares and list itself on the bourses.
Biz encore: Amitabh Bachchan. Hindustan Times
In an emailed statement to Mint, Amitabh Bachchan said he was considering a study to understand the “feasibility” of buying out minority shareholders in AB Corp.
In the year till June, Amitabh Bachchan bought 582,700 shares of AB Corp., which is about 1.2% of the firm’s Rs48.77 crore equity capital. He held 36.38% of AB Corp.’s shares as of 16 June, according to regulatory filings with the ministry of corporate affairs.
Along with his wife Jaya Bachchan, son Abhishek Bachchan and some investment arms, Amitabh Bachchan holds at least 60% of AB Corp.’s shares, said a company official, who did not want to be named because he is not authorized to speak to the media.
Latest regulatory filings show Amitabh Bachchan, Jaya Bachchan and Abhishek Bachchan’s combined holding at 48.87%.
However, if telecom firm Himachal Futuristic Communications Ltd’s (HFCL) 27.27% stake in AB Corp. is considered to be part of the promoter group, the holding of the Bachchan family and their associates goes up to 76.14%.
According to HFCL’s annual report for 2008-09, the company owned at the end of March 13.3 million shares of AB Corp., acquired for Rs165 crore at an average price of Rs124 apiece.
One of HFCL’s founders, Vinay Maloo, is a director of AB Corp. Maloo, however, has quit HFCL and now runs Enso Group, which has interests in oil and gas exploration and production.
Banks, financial institutions and mutual funds together own 14.5% of AB Corp.’s shares, according to the company’s latest regulatory filings.
There are some 1,600 private companies and individuals who collectively own around 9% of AB Corp.’s shares.
AB Corp.’s shares, which were never listed on the bourses, were placed with private companies and individuals in the “initial years” or the mid-1990s, according to Amitabh Bachchan’s emailed statement.
A little over two years ago, the company had said it would issue new shares through a public issue and list itself on the bourses.
The expenses incurred in preparing for the proposed public issue are currently being written off, shows the company’s annual report for the year till September 2008—the latest available at present. AB Corp. follows an October-September fiscal year.
Some two years ago, a large number of investors had acquired AB Corp.’s shares expecting the company to get listed on the bourses. Many of these shareholders are disappointed that the company hasn’t listed itself yet.
“Two years ago, I had bought 200 AB Corp. shares for around Rs160 (each) through an off-market trade expecting a public issue,” says Nikunj Jhunjhunwala, a Kolkata-based businessman. “I am still waiting for a profitable exit.”
Meanwhile, some people have already started accumulating AB Corp.’s shares in the hope that they would be able to make a killing by eventually selling them to Amitabh Bachchan, according to Rajan Shah, chairman and managing director of Mumbai-based 3A Capital Services Ltd.
“People have been making offers to buy AB Corp.’s shares from us,” says Shah, whose company trades only in illiquid shares. “I can’t say for sure whether they are representatives of Mr Bachchan, but it seems they are accumulating on his behalf.”
AB Corp.’s shares are currently fetching Rs65-70 apiece in off-market trades, according to Shah.
AB Corp. ran into rough weather following the Miss World Pageant in Bangalore in 1996. It was declared a sick company by the Board for Industrial and Financial Reconstruction in 1999, when recalls Shah, its shares fetched Rs6-7 apiece in off-market trades.
However, Amitabh Bachchan managed to turn the corner with Kaun Banega Crorepati—a television show he hosted for the Star network.
In the year that ended September 2004, AB Corp. wiped off its accumulated losses, and has since been profitable every year. In the year to September 2008, it posted a net profit of Rs14.29 crore, which translates into earnings per share of Rs2.93, on revenue of Rs22.94 crore.
Under “a contract”, AB Corp. receives a substantial share of Amitabh Bachchan’s income from brand endorsements, shows the company’s annual report.
In the year to September 2008, revenue from endorsements alone was Rs22.45 crore. At the end of September last year, AB Corp.’s directors owed it Rs24.91 crore, which is more than full-year revenue for 2007-08, the annual report said. AB Corp. is returning to film production in a big way after a few years with Paa—a film starring Amitabh Bachchan and Abhishek Bachchan, which is to be released this week—and Vihir, a Marathi film, which is under production.
“We adopt a conservative approach and our activities are (in) joint ventures,” Amitabh Bachchan said in his emailed statement to Mint, when asked about the road ahead.