Burmans Want To Manage Eveready Professionally, Limit Promoter Say
The Burmans of Dabur India Ltd., now the largest shareholders in Eveready Industries India Ltd., would prefer a professional management to run India's largest dry cell battery maker and limit promoter involvement.
Eveready might need a "new direction", Mohit Burman, vice-chairman at Dabur India, told BloombergQuint over the phone from the U.K. When asked to elaborate, he said "we manage our businesses professionally" and that helps generate better valuations. "And of course we limit promoter involvement. I believe if we put these systems in place in any FMCG business, it will automatically be re-valued."
According to Burman, imports from China may fall and that would help Eveready. The company, despite its strong brand and potential, is undervalued, he said.
Eveready, facing financial stress, has seen its market value plunge by three-fourths in the last two years. And its debt rose as it struggled to fend off competition from cheaper imports.
The Burman Family Holdings, the family office of the controlling shareholders of Dabur India, earlier this month increased its stake in Eveready Industries by 8.48 percentage points. In all, the Burmans have raised their shareholding from 5% to 20% in the past year. That's more than twice the 7.98% ownership of the promoter Williamson Magor Group as of July 17. According to Burman, there might be room for more stake purchase in Eveready. But at this point he is not seeking control of the company.
The family office, set up 20 years ago to deploy wealth of Dabur India, has invested nearly $500 million in consumer, healthcare, hospitality and financial services, according to its website. It partnered with the British insurers to set up Aviva Life insurance India. The family office has also backed businesses such as DMI Finance, Taco Bell and RBL Bank Ltd., among others.
In 2018, the Burmans teamed up with the Munjal family, promoter of the Hero Group, to make a bid for Fortis Healthcare Ltd.
Mohit Burman, in the interview with BloombergQuint, talks about the group's plan for Eveready.
What is the purpose of gradual increase of stake in Eveready?
It is a financial investment. I believe that the business intrinsically has a lot of value, has a lot of potential and the shares are undervalued. I’m buying it for the family on a personal basis.
What kind of opportunity do you see in Eveready?
I believe that it is in similar space as ours—FMCG. With this whole Covid situation, I believe that the Chinese imports will go down and the battery business because of its strong brand, the company has a lot of potential.
What are your thoughts on opportunity in the electric vehicle space for battery manufacturing?
That (EV) is also an opportunity but I’m just a financial investor and it will be wrong for me to say what potential avenues are there for the company.
Do you plan to increase your stake increase your stake upwards of 25%?
At this point of time, I don’t. [But] We are close to 20% and there is still more room for me to buy at prices which I feel makes sense, but not to cross 25% and make an open offer. That’s not what my intentions are at this point of time.
Are you seeking a board seat?
I’m also not seeking any board seat and nor I’m in discussion with the existing promoters to become a co-promoter or to manage the business together. I believe that as (and) when the discussions, if they were to happen, I will decide. At this point of time, I’m not reaching out to them.
Is it because of the market situation right now that you have a cautious approach?
We have always looked at opportunities in taking active financial investment, like Fortis for example. We felt that this (Eveready) business has a lot of potential. The promoters are having some issues and it will affect the business to certain extent but I believe the long-term potential of this company is very bright.
Eveready has been out in the market to raise fresh funds but it hasn’t been able to do so?
Maybe, it needs a new direction.
Are you looking for more opportunities to invest?
There could be a lot of opportunities. We focus on businesses where we can add value such as in consumer, healthcare and financial services space, and our focusing on these sectors for investment. We have a life insurance company Aviva, general insurance company Universal Sompo, have a large stake in health insurance company Religare. We also have investment in hospitality and CSR space but that is being badly hit due to Covid-19.
Right now, I’m focusing on Eveready.
What value the Burman family can add to Eveready? You mentioned the maybe Eveready needs a new direction, what do you mean by that?
Historically, we manage our businesses professionally and we put the right systems in place and incentivise the management to perform. And these are the reasons we get such high P/Es. And of course we limit promoter involvement. I believe if we put these systems in place in any FMCG business, it will automatically be revalued.