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Shiv Kumar exits Kesoram after making a killing

Kausik Datta

The Dubai-based investor Shiv Kumar, who hit the headlines by his acquisition of over 10 per cent stake in Kesoram Industries in February, appears to have pulled out of the Basant Birla group company.

As per information available with the depository services of the company, the names of the domestic and overseas entities through which Kumar held his shares in the Rs 13.45 billion diversified firm have disappeared from the list of shareholders.

However, according to sources, the non-resident Indian had made a killing by offloading his stake at an average price of Rs 55-plus a share against his acquisition cost of below Rs 30 a share.

Kumar had acquired the over 10 per cent stake by parking shares in different entities without violating the Securities and Exchange Board of India takeover norms. Since the shares were held by several companies, with none holding more than 5 per cent, Kumar did not have to inform the management even though his stake had exceeded 5 per cent.

He maintained a protracted silence after his acquisition came to light in mid-February. However, the panic-stricken management went on a buying spree to raise its stake to a comfortable level, fearing that Shiv Kumar would stage a raid.

"I will definitely talk to the Indian press. Before that, give a week to get my house in order," Kumar had said from Dubai on February 15.

The Birla group scaled up its shareholding in Kesoram by massive 13 per cent in only three months. While the promoters themselves increased their stake in the company by a meagre 1 per cent to 21 per cent, their "friends and supporters" raised their stake to 17 per cent from 5 per cent.

By this process, indirect shareholding of the Birlas mounted to 38 per cent from the previous year's 25 per cent without violating the 5 per cent creeping acquisition norms, prescribed by Sebi. The holding of financial institutions, however, fell to 17 per cent in 2000-2001 against 24 per cent in 1999-2000.

Most of Birla's friends and supporters bought shares from the institutions, which were unwilling to offload part of their holdings, besides purchases from the open market. The combined stake of the promoters, their supporters and FIs now stands at 53 per cent. Since the promoters have a good relationship with the institutions, the company is no longer an easy takeover target.

Insider sources said Birla and his friends acquired most of their shares at around Rs 55 from financial institutions and in the range of Rs 55-60 from the open market.

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