Mumbai: Vijay Kantilal Sheth, the vice-chairman and managing director of Great Offshore Ltd, is in danger of losing control over a firm that was hived off from India’s biggest private ocean carrier some two years ago after a family split.
Sheth’s stake is estimated at about 15.73%, putting the owner of India’s biggest integrated offshore oilfield services provider somewhat at the mercy of the few lenders with whom he raised funds to buy the holding at the time of de-merger from Great Eastern Shipping Co. Ltd in 2006. Sheth had pledged some of his shares.
Now, with the stock price of Great Offshore plunging to below Rs300 per share from the allotment price of Rs850 per share in 2006, lenders have been putting pressure on Sheth, seeking to sell the shares pledged with them if he isn’t able to meet the shortfall in scrip prices, several people with knowledge of the situation told Mint.
So far, Sheth has managed to hold off any related stock sales by putting in more shares as collateral but nervous lenders are now understood to have approached some potential buyers.
Some of the names doing the rounds include ABG Shipyard Ltd, India’s biggest private sector shipbuilder, Videocon Industries Ltd and Punj Lloyd Ltd. A top ABG official denies it has any interest in Great Offshore, saying “there is no truth whatsoever in this claim”.
After multiple attempts to get comment, a Great Offshore spokesman said Sunday evening that he wasn’t aware of any such developments. A telephone call to Sheth was answered by one of his family members who said he wasn’t available.
Typically, Indian lenders keep shares worth three times the loan amount as collateral when lending against shares. When a stock slumps, it also brings down the value of the collateral. When the value of the collateral falls below a particular threshold, worried about potential risk, lenders ask such clients to top up the collateral by pledging more shares.
In the case of Great Offshore, its shares were quoting around Rs1,150 early this year but have slumped to around Rs290 by Friday’s closing. The shares are down some 15% in the past one week alone. Sheth did buy back 978,977 shares from the public, investing about Rs55.24 crore through a buy-back offer that ran from May to September, in what some say was an attempt to bolster his holdings and pre-emptively ward off any hostile takeover attempts.
People familiar with the loan said Motilal Oswal Financial Services Ltd, a large retail brokerage, is one of the lenders to Sheth. Motilal Oswal, chairman and managing director of the firm, said he cannot comment on individual clients.
Adding to the drama, about 11 shareholders, having a cumulative 4.79% stake, withdrew from the promoter group of the company in October, leaving Sheth, his wife and children as the promoters. But these other shareholders didn’t have any separate representation on the board nor were they in management control. Bharat Sheth and Ravi Sheth, Vijay’s cousins and owners of Great Eastern Shipping, own around 5% stake in Great Offshore.
A cash crunch forced Great Offshore to discontinue pursuing its January offer for purchase of a controlling stake in Cayman Islands-based Sea Dragon Offshore Ltd, said one person familiar with the matter who didn’t want to be named. Great Offshore initially pruned an offer and later abandoned it citing “significant change in the economics of the project”.
Great Offshore recently said it closed a deal to buy 100% equity stake in KEI-RSOS Maritime Ltd and Rajamahendri Shipping and Oilfield Services Ltd for around Rs160 crore.
Great Offshore owns a fleet of 41 vessels. Most of these assets are locked in long-term contracts on dollar basis.