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April 27, 1999


Mallya-Chhabria fight for Herbertsons enlivens 'uneventful' India Inc

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The battle for liquor major Herbertsons Limited, being waged by the UB Group's Vijay Mallya and Shaw Wallace's Kishore Chhabria, continues, enlivening India Inc which is reeling under recession and political instability.

While mega mergers, hostile takeovers and ruthless retrenchments mark the global corporate scene, India Inc offers a sharp contrast: fly-by-night operators cheat on gullible but greedy investors, capital market regulator cracks the whip on an errant stock exchange official.

Analysts say most of the Indian corporate majors are lying low now, immersed in restructuring, cost-cutting and flab-cutting, preparing for the next Big Opportunity.

UB group chairman Vijay MallyaShaw Wallace chairman Kishore Chhabria Barring the automotive, infotech and media sectors which are witnessing some action, India Inc is passing through a none-too-exciting phase. Which is why the legal battle for control of Herbertsons, being fought by two of India's most colourful liquor barons, attracts attention, they reason. In all, Chhabria is said to own 47.2 per cent of Herbertsons's shares, including 1.2 per cent stake that materialised from the conversion of fully convertible debentures. The UB group owns 26 per cent. Its associates own another nine per cent.

The UB group disputes that Chhabria violated the SEBI takeover code while acquiring the 20 per cent equity.

In other words, the UB group, with an effective 35 per cent equity as against Chhabria's 27.2 per cent, feels it has the right to control the company.

On April 22, the Bombay high court ruled that Chhabria's disputed 20 per cent shares in Herbertsons will not be taken into consideration while counting the votes cast at the annual general meeting on December 30, 1998. The ballot boxes were sealed as per a court order.

The vote was held to decide on the removal of nine board members. Chhabria is seeking to install his own men on the company's board.

The court ruled that its verdict will become operational only after July 15. By then, Chhabria can contest it in the Supreme Court.

The Securities and Exchange Board of India has to rule whether Chhabria had violated its takeover code while acquiring 20 per cent equity in Herbertsons.

The SEBI was slated to hear both the camps on April 23, but has adjourned the hearing to a later date on request of either side. The SEBI was not ready to deliver its verdict, so a mere hearing was felt unnecessary at a time when the court was seized of the matter.

This has prompted the Bombay high court to ask the SEBI to decide as soon as possible on Chhabria's acquisition of one-fifth of Herbertsons's shares.

The court further ordered that votes should be counted in the presence of a court officer and two persons from each camp. Herbertsons has been barred from selling assets or taking major decision for eight weeks.

Subsequent to the court order, both the camps have sought separate hearings from the SEBI, eliciting an affirmative response from the market regulator.

Votes cast on December 30 last are expected to be counted only after July 15. According to media reports, the Chhabria side will contest the high court verdict. So the SEBI verdict on whether Chhabria indeed violated its takeover code will be crucial.

Amid so much drama, the company reported an increase in net sales of 21 per cent for the financial year 1998-99.

Turnover increased from Rs 2.19 billion in 1997-98 to Rs 2.67 billion in 1998-99. The company achieved sales of 7.6 million cases, recording a volume growth of 14 per cent over the previous year.

Gross profit at Rs 100.8 million in 1998-99 and net profit after tax at Rs 50.5 million were posted in spite of considerable investments on brand promotion.

Bagpiper whisky, the flagship brand of Herbertsons and the third largest selling whisky in the world, continued its impressive sales.

Herbertsons' Honey Bee brandy sold 745,000 cases in 1998-99. The company's Romanov vodka became the first and only vodka brand to sell in excess of 100,000 cases in India.

Compiled from media reports / UNI

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