Bharati Shipyard’s chief finds himself fighting for a company he didn’t intend to acquire.
Prakash C Kapoor’s net worth may be over Rs 60 crore, but he is middle class at heart. A blue blazer is his permanent fashion statement, brown rice and dal his favourite food and his workplace in upmarket Ballard Estate looks more like a government office with old furniture retaining its pride of place.
The only thing this low-profile engineer and naval architect from IIT Kharagpur wanted was to be an entrepreneur and it didn’t take long to realise his dream. He promoted Bharati Shipyard with a classmate, Vijay Kumar, in 1976 just five years after joining government-run shipbuilding firm Mazagon Dock.
His ability and deep knowledge of ship-building make it unsurprising that Bharati Shipyard is now India’s second-largest private sector shipyard with sales of over Rs 1,000 crore and post-tax profit of Rs 130 crore. But even a year ago, the 64-year-old Kapoor would have been surprised to find himself in a bidding war with ABG Shipyard for drilling firm Great Offshore.
Indeed, acquiring Great Offshore was not high on his agenda when its promoter and his friend Vijay K Sheth came knocking on his door for a loan after IL&FS and Motilal Oswal turned him down late last year.
Sheth was in deep waters not least because the shipping downturn coincided with a takeover threat from ABG Shipyard, India’s largest shipbuilder. Kapoor lent Sheth around Rs 200 crore against the pledge of a 14.89 per cent shareholding. With Sheth unable to repay the amount, Bharati Shipyard acquired the stake — a shade below the 15 per cent cut — off that would have triggered the takeover code — at Rs 315 a share.
The transaction left Sheth with less than one per cent in his company but Kapoor ensured that Great Offshore's management did not change and that Sheth continued to play a part in it. “There is no need for change,” Kapoor told reporters.
At the time, Kapoor also said he did not intend to increase Bharati’s holding to 15 per cent. But within three weeks, Great Offshore’s fractured shareholding structure, which leaves about 84 per cent in public hands, made him opt for an open offer. Bharati’s offer for an additional 20 per cent was made at Rs 344 a share, below the market price the day the open offer was announced.
Kapoor agrees that he had sensed a competitive bid and on Tuesday, ABG Shipyard duly made an open offer to buy 32.12 per cent stake at Rs 375 a share. But Kapoor was already a step ahead. Leveraging his close ties with the Sheth family, he managed to buy an additional 4.8 per cent from Bharat Sheth, Vijay Sheth’s cousin, in a block deal for Rs 403 a share.
Always the gentleman, Kapoor declined to describe ABG’s bid as hostile. But the block deal meant that Bharati’s open offer price had gone up from the original Rs 344 to Rs 403, implying a pay-out of around Rs 300 crore.
Kapoor, however, is now raring to raise the offer price still higher to ensure that he does not lose control of a company that may have become his by luck by now presents a great opportunity to diversify.
Kapoor may lack the business jargon of today’s entrepreneur, but over 30 years of entrepreneurial instinct tells him that it makes sense to control Great Offshore. India’s leading integrated offshore oilfield services provider, it owns a fleet of 36 offshore assets, which include 22 offshore support vessels, 11 harbour tugs, two drilling rigs and one construction barge.
Bharati Shipyard currently owns three shipyards, which are strategically located at Thane, Ratnagiri and Kolkata. It also has two new yards coming up at Dabhol and Mangalore. A subsidiary of the group, Pinky Shipyard, owns a shipyard at Goa.
His firm is building the first offshore rig at its new yard in Dabhol at a cost of Rs 1,000 crore. Bharati had secured the order from Great Offshore earlier and industry circles believe that that is what encouraged Kapoor to acquire it.
Equally, Great Offshore, which reported net profit of Rs 211crore last year, can only gain from the expertise of Bharati Shipyard’s managing director. Kapoor has managed to expand his company’s order-book to Rs 4,000 crore, which is no small achievement in the current economic downturn when most shipyards globally have seen only cancellations.