Kolkata: Chairman Shree Kumar Bangur strengthened his hold over Rama Newsprint and Papers Ltd by buying the holding of its founders, the Ramsinghani family, after consumer goods maker Emami Ltd built up a 5% stake in the company.

Graphics: Yogesh Kumar/Mint

Emami didn’t comment on whether it had wanted to take control of one of India’s biggest newsprint manufacturers.

“It’s a strategic investment," said Emami’s chairman R.S. Agarwal. “We don’t have any immediate plan of launching a takeover bid for Rama."

The purchase of the Ramsinghani stake gave Bangur a share of more than half in Rama Newsprint.

Kolkata-based Emami, whose products include Boroplus antiseptic cream, Fair and Handsome skin fairness cream and Navratna Cool Talc, also produces paper.

Bangur took over management control of Rama Newsprint in 2003, when he acquired 33.85% in the company from its lenders. Since then, the Ramsinghani family has been selling its stake in the company.

“They sold some shares to us; they sold some in the market as well," Bangur said, adding he bought the last tranche—over 9.2 million shares, or 16.84% of Rama Newsprint’s equity capital—in January for around Rs40 crore. Bangur now owns 53.16% of Rama Newsprint.

Rama Newsprint’s vice-chairman Vashu J. Ramsinghani wasn’t available to comment on the transaction.

In October 2008, Emami concluded a hostile takeover of herbal healthcare firm Zandu Pharmaceutical Works Ltd. It was the first successful hostile takeover in India in many years and started with Emami acquiring a 24% stake from one of the co-founders of Zandu.

Emami has now trained its sights on an old Kolkata-based pharmaceutical company whose founders “do not see eye-to-eye any more", according to Agarwal, who refused to name the firm.

Rama Newsprint can produce up to 145,000 tonnes of newsprint a year. One of the company’s key assets is a 400-acre factory on the outskirts of Surat, Gujarat, of which at least half is vacant.

“We are exploring the possibility of setting up a special economic zone there," said Bangur. In fiscal 2009, Rama Newsprint posted a loss of Rs27.27 crore on revenue of Rs346.34 crore.

Emami’s unit Emami Paper Mills Ltd has a newsprint capacity almost equivalent to that of Rama Newsprint’s while being more profitable. In fiscal 2009, Emami Paper posted a net profit of Rs22 crore on revenue of Rs435 crore.

Bangur is currently busy completing the Rs1,400 crore expansion of his other paper firm, West Coast Paper Mills Ltd. “We should be able to sort things out at West Coast by June, following which we will turn to Rama," he said. Among the options being considered for Rama Newsprint is a merger with West Coast, he added.

West Coast is raising its annual pulp-processing and paper-making capacity to 300,000 and 400,000 tonnes, respectively. Revenue in the current year is expected to top Rs700 crore, said Bangur.