Interview / S S Kelkar

'It's a myth that we were caught napping'

After a fortnight of intense media and public attention, brought about by the acquisition of Bombay Dyeing stock by Calcutta-based jute baron Arun Bajoria and his associates, things seem to be back to normal at the Neville House, the company's headquarters in South Bombay. There are no signs of clerical hyperactivity or managerial frenzy.

Even during the height of the Bajoria-sparked controversy, Bombay Dyeing chairman Nusli Wadia chose to steer clear of media spotlight, leaving the task of explaining the company's stance to his trusted lieutenant, company veteran and executive director S S Kelkar, 59.

Kelkar was said to be a candidate for managing directorship until Wadia chose Adhiraj Sarin for the top job last month.

These days, he is busy on international telephone lines sewing up financial nitty-gritty for a joint venture in Indonesia. On November 2, in an exclusive interview with Y Siva Sankar, a cool-as-a-cucumber Kelkar offered a glimpse of Bombay Dyeing's mindset in the post-SEBI Takeover Code age.

To begin with, how would you rate Bombay Dyeing's performance in the last one year?

I admit the last 12 months have not been one of our best years on the operating side. There were problems arising out of the escalating oil prices. These impacted the petrochemical prices, one of our raw materials.

The increasing cost of energy also made things difficult for us. Earlier, a unit of electricity cost Rs 2.50. Now the cost has gone up to Rs 4.17.

Globalisation has unleashed a buyers' market. Selling prices have not kept pace. So our margins are indeed under pressure.

Has this sense of unease been heightened by Arun Bajoria's acquisition of Bombay Dyeing stock?

Not really. The two issues are not related.

We have informed SEBI that Arun Bajoria, several other Bajorias and their associates have violated the Takeover Code. We've requested SEBI to take remedial action.

We have also petitioned the Company Law Board that the register of members of the company should be rectified because Bajoria violated the Takeover Code. The CLB has granted interim relief valid till November 7, restraining Bajoria and his associates from exercising their voting rights in respect of the shares held by them.

Arun Bajoria has said that the proposed merger of Scal Investments with Bombay Dyeing symbolises mismanagement on your company's part.

I feel some people are reading too much in the name of the subsidiary. Scal Investments is not a securities firm. Its main activity is real estate. It is a profit-making firm. In the last one year, maybe its operations slackened a bit. However small the profit may be, but it still is a profit-making firm.

The proposed merger is purely for administrative reasons. Where does the question of mismanagement arise here? The firm still has several projects on hand. So instead of duplicating auditing, accounting and other processes, we thought we would do well to integrate it into Bombay Dyeing.

Initially, news reports hinted that Arun Bajoria might be acting at the behest of the Reliance group. Of course, Reliance issued a statement saying it is not involved at all. Now reports talk of "arch rivals" Bombay Dyeing and Reliance striking real estate deals. What gives?

(Laughs). These things are written in a certain manner by some people just to sell their business newspapers. Bombay Dyeing and Reliance are commercially related. One of our main inputs is paraxylene. We buy it from Reliance. We are one of their customers. So how can we be arch rivals?

These hawa-based (hawa = wind) reports perhaps help some people to sell their newspapers. I would not like to say anything more on this.

When the news that Arun Bajoria acquired a more than 5 per cent stake in Bombay Dyeing broke, or even before that, when you first discovered it yourself, why didn't you adopt a proactive approach and inform the media as well?

Why should I? We are in business. We are not interested in fighting wars through the media. We did what needed to be done. We informed SEBI. We petitioned the CLB.

Well, there were a lot of speculative reports. When the think-tank of Bombay Dyeing met to discuss the issue, what was your biggest concern?

Yes, you are right, there was a lot of misinformation and inaccurate reports in the media. That was our biggest concern. We decided to place the facts as they are before the media. That helped a great deal indeed.

Once the media discerned the reality, the issue stopped being of interest to them. That explains why reports on the so-called takeover tussle, all those references to Bombay Dyeing as a target company, have stopped. The media has realised that it can't squeeze anything more from this issue. Our stand has been well appreciated. So it seems speculative reports are not there anymore.

In the wake of this episode, has there been introspection among the Bombay Dyeing management?

Not really. Someone, acting in concert with others, violated the SEBI Takeover Code deliberately. How do I link them all? There's no way of doing that. So SEBI has placed the responsibility on the buyer to inform the company.

Even today, there is no communication from anyone.

Were communication channels open between you and Arun Bajoria at any point in time?

No. Why should we have them? Someone violated the Takeover Code. The buyer did not even extend the basic courtesy of informing us. So we informed SEBI about it. That is all there is to it. We can't keep talking to everyone and anyone.

Is it true that Bombay Dyeing was found napping when Arun Bajoria was in his act? Do you think Bajoria succeeded to pick up a substantial stake because the stock was undervalued?

It's a myth -- that we were caught napping or that the management was inefficient. There are no mechanisms available to track every single traded share to its buyer and seller. We did discover that this particular group of Bajorias acquired more than 5 per cent of equity and promptly informed SEBI.

As for the undervalued stock, yes I do agree, that is an aberration. But there is nothing we can do about it. That is how the market perceives Bombay Dyeing. It is for the markets to value the company correctly.

All I can say is Bombay Dyeing is a low-profile company. Our stock is not highly traded. Our capital is just Rs 410 million. We have been paying impressive dividends for the last 115 years. Our shareholders never had to go through transactions that gave them losses.

Arun Bajoria has been consistently making statements ever since the controversy erupted. He even referred to Nusli Wadia as Mohamed Ali Jinnah's grandson. Nusli Wadia's only public appearance has been his visit to the Breach Candy Hospital to wish the convalescing prime minister well. He has also maintained what seems a discreet silence. Perhaps you can throw some light on this?

Look, the Wadias own 41 per cent of the stock. Another 15 per cent is with the financial institutions. Where is the need to feel concerned? He is not unduly perturbed. Our record is clean.

Bombay Dyeing is a decent company. We have large liquid assets. We have impressive real estate in the form mill lands in Bombay and buildings. We are not bothered about who says what.

We are focused on facts. We are not here to indulge in speculation or to make provocative, mischievous statements. We are not here to pass personal comments. Yes, Wadia is Jinnah's grandson. So?

We are an old, mature company. We are not interested in reacting to statements in press.

At one point in time, Arun Bajoria has said he might consider selling his stake to the company provided the price is right.

As I said, I am not interested in making speculative statements. I can offer you information, facts.

Are there any plans of buyback or counter-offer?

If I say anything in this context, that would be purely speculative. If Bajoria makes an open offer, then we will see whether we should make a counter-offer. It is for him to state what he thinks is the right price.

Has there been any pressure from shareholders at large for more information on the state of affairs in Bombay Dyeing?

No. None whatsoever.

What does that mean?

That means our shareholders are loyal to the company. They are not unduly bothered by this episode. We have interacted with a broad spectrum of mediapersons and explained the facts. That has helped in conveying the right signals to the people at large.

You are sure that Bajoria has violated the Takeover Code. But SEBI, which had introduced the Takeover Code, does not seem to be sure. It is still investigating.

Our company has no role in this. The way Bajoria acquired our stock has led to us raising all these questions.

Had he followed the SEBI Code, there wouldn't have been a problem.

There is a view that the SEBI Takeover Code has shortcomings. Apparently, Wadia's friends Ratan Tata and Keshub Mahindra met with SEBI chairman D R Mehta soon after the Bajoria episode began, to discuss the issue. Will Bombay Dyeing spearhead a collective corporate campaign against the code?

No. We have no such plans. The P N Bhagwati Committee is reviewing the code anyway. No law is perfect.

(Pauses, thinks and then smiles.) I believe India has the second largest population of lawyers. What will they all do if all the laws are perfect? Perhaps, we need imperfect laws for them to pick a comma here and a semicolon here.

You've been a Bombay Dyeing veteran and must have seen the company through several ups and downs. How do you rate this present controversy?

I wouldn't rate this because it is not a major incident at all. All I would say is it has taken up a lot of management time which was avoidable.

Does this mean this row has affected the company's projects or plans in any way?

Not in a major way. What I mean is, the time that has been spent on this issue, could have been well spent on other constructive things. This has been an unnecessary distraction. But then, these incidents are part of corporate life.

There are different views on this controversy. Some say this case is good for Corporate India because it will emerge as a benchmark for interpretation of the Takeover Code in future.

Well, this has been an experience for all of us at Bombay Dyeing. Even the finance minister has called for a meeting on November 17 to discuss the Takeover Code.

Bombay Dyeing seems to have unwittingly become the first company to determine the effectiveness of the Takeover Code.

Someone or the other would have got that tag. It's not a major issue with us.

SEE ALSO:

Arun Bajoria: The mysterious jute baron with uncanny business acumen

Reliance rules out buying Bombay Dyeing shares

Bajoria's temporary 'no' for open public offer in Bombay Dyeing

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