Khaitan family makes way for Burmans in Eveready Industries

Before we look at the current open offer made by the Burman family to the shareholders of Eveready, there is a little bit of history to delve into. Back in 2020, one of the group companies of the Khaitan group, McNally Bharat Engineering had gotten deep into financial troubles. At that time, the promoters had pledged their shares in McLeod Russel and Eveready Industries as security to these creditors of McNally Bharat Engineering.

However, these loans could not be repaid by the Khaitan group and resulted in creditors taking over the shares and selling these shares in the market. This resulted in the stake of Khaitan family in Eveready coming down from over 44% to a tad below 5%. At that point, to prevent the Khaitan family losing control, the Burmans of Dabur had acquired the stake, taking their holdings in Eveready to 19.84%.

At that point, the Khaitan family, despite having just 4.84% (or a fourth of the stake held by the Burmans), were allowed to continue running the company. The Burmans were not interested in a takeover of the company unless the Khaitan family wanted to continue running the business. However, after nearly 2 years it looks like the Burman family finally wants to take charge and make an open offer to shareholders. That is the background.

In deference to the wishes of the Burman family to now take over management control of Eveready Industries, the Khaitan family has agreed to step down from the board of Eveready. Accordingly, all the family members of the Khaitan group have stepped down from the board, although they continue to hold 4.84% in Eveready. Burman family will take control of Eveready Industries and start managing the day-to-day business affairs.

Accordingly, both Aditya Khaitan and Amritanshu Khaitan tendered their resignations from the Board. While Aditya Khaitan was the Non-Executive Director and Chairman of Eveready, Amritanshu was the Managing Director of the company. They have agreed to let the company be taken over by a new leadership and give a new direction to the course of events at Eveready Industries Ltd.

Earlier Burman group held 19.84% stake in Eveready Industries. On 28th February, the Burmans purchased an additional 38.22 lakh shares or 5.26% stake in Eveready in a deal that was syndicated by JM Financial Services. With this deal, the total stake of the Burman family goes to above 25% and now they need to statutorily make an offer to the shareholders of Eveready to acquire another 26% stake in Eveready Industries, as per SEBI norms.

Eveready has been struggling with high debt over the last few years and has been in the process of monetizing some of its assets. Just last year, Eveready Industries had hived off its loss-making tea operations and sold its surplus land in Chennai and Hyderabad in order to reduce its debt further. With Burmans demanding control and 3 non-executive directorships on the board of Eveready, it was clearly not feasible for the Khaitan family to continue.

Mohit Burman was of the view that with over 30 months of being shareholders and holding a significant larger stake than the Khaitan family, it was time for the Burmans to move in and take charge of the company. This would also give greater clarity to the shareholders of Eveready and allow them to gain market share and enhance the growth prospects. The stock has rallied sharply in the last 2 years and the brand is yet to be fully leveraged.