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VST chairman talks about takeover bids at AGM

Syed Amin Jafri in Hyderabad

VST Industries Limited chairman Abhijit Basu on Thursday informed the company's shareholders about the takeover bid by Bright Star Investments and Russell Credit and said that "there is a measure of uncertainty as to when the transactions will be completed."

Addressing the 70th annual general meeting of the company, Basu said that the "public offer has closed but the Calcutta high court has advised that the transfer of shares will be subject to its decision on the petition."

"Since the matter is subjudice, it would not be appropriate for me to make any further comments at this point of time," he quipped.

Narrating the background on the takeover bid, he told shareholders that, "Despite the turnaround in the company's fortunes, its share prices failed to recover because of depressed conditions in the stock market, particularly for the so-called cash shares. This created the circumstances favouring a takeover bid for your company, which enjoys the highest reputation with all its stakeholders and which has consistently looked after its shareholders in the past."

He said that the takeover bid was initiated by Bright Star Investments Limited, controlled by Radhakishan S Damani, a stockbroker and financier. Bright Star and others acting in concern, having acquired 15 per cent of the company's shares made a public announcement in the press, offering to buy a further 20 per cent, namely almost 3.1 million shares, at Rs 112 per share.

This was followed by a counter-bid from Russell Credit, a wholly owned subsidiary of ITC, on March 6, 2001, at Rs 115 per share, which it revised to Rs 120 and later to Rs 125. The bid by Bright Star Investments was raised to Rs 151 for 30 per cent.

June 13 was the date of closure of the offer and by July 13, the transactions are to be completed in accordance with the Letter of Offer. Meanwhile, a public interest litigation was filed by an individual against the Russell Credit offer in the Calcutta High Court on May 21.

"One of the reasons is that ITC Limited, through Russell Credit, would enjoy a virtual monopoly of the Indian cigarette market, to the detriment of the consumer. Furthermore, by virtue of the common shareholding, British American Tobacco Company, through ITC, would control more than 50 per cent of the company's equity, which would be against the declared policy of the government of India in respect of foreign companies in the cigarette industry," VST chairman said, recalling the contentions of the petitioner.

"The petitioner has also attempted to establish the likelihood of greater chances of smuggling of cigarettes and greater possible impact on the health of smokers in India, as a consequence of increased BAT influence in the Indian market. The Union of India (through the ministries of finance and health and family welfare), Sebi, ITC, Russell Credit and VST were the original respondents but at a preliminary hearing on May 23, Bright Star was also made a party," he pointed out.

Basu said that all parties have been directed to file their affidavits by June 15 and their affidavits in reply by June 25. Hearings would commence on June 27.

The AGM later approved unanimously the Board of Directors' recommendation for a dividend of Rs 2.50 per share for the financial year 2000-01 (ended on March 31, 2001), a significant jump from the Re 1 per share declared in the previous year. The AGM turned out to be a dull affair with a thin attendance of individual shareholders. Only a few of them raised queries which were later answered by the chairman of the company who felt that the "questions this time are very wide-ranging with no particular focus."

The company's turnover for FY 2000-01 increased by 1.3 per cent to Rs 7.56 billion from Rs 7.46 billion in the previous year. Profit before tax at Rs 300 million showed a significant increase over the corresponding figure of Rs 184 million in the previous year, indicating a marked improvement in trends for the company's operations. Profit After tax amounted to Rs 275 million against Rs 157 million in the previous year.

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