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| Vijay Sheth is second in family to lose control | |
| Abhineet Kumar / Mumbai May 9, 2009, 0:36 IST | |
Vijay K Sheth is not the first member of the Sheth family to lose control of his business after parting ways with Great Eastern Shipping, the company which is close to completing 61 years of operation.
His cousin, Ghanshyam Sheth, who was the first one to leave to go his own, met a similar fate. In 2000, Ghanshyam Sheth, who managed Gesco Corporation, which was set up as a real estate division of Great Eastern Shipping, faced a hostile takeover bid from Abhishek Dalmia, a minority shareholder and promoter of Orissa Cement. Dalmia raised his stake beyond 5 per cent and made an open offer.
The Sheths, with assistance from the Mahindras and HDFC, made a counter offer. The company is now Mahindra Lifespace Developers, where Mahindra & Mahindra owns 51 per cent stake. Ghanshyam Sheth, who has no shareholding in Mahindra Lifespace, is still in the real estate business but runs a new entity, says an industry source.
Similarly, Vijay Sheth, who was heading the offshore operations of Great Eastern Shipping, borrowed heavily to acquire about 15 per cent stake in Great Offshore, the demerged entity set up in April 2005. The new company was formed following a family settlement that saw Great Eastern stay with KM Sheth.
Sheth had pledged a significant portion of his stake with lenders — Motilal Oswal and IL&FS. With the industry doing well, the company’s share price rose from Rs 727 on December 21, 2006, the day it listed on the Bombay Stock Exchange, to Rs 1,101.9 on January 7, 2008, when it touched a life-time high.
But with the economic downturn, by the end of the year, it touched a low of Rs 208.85 on December 29, 2008. But even before this, the lenders with whom the shares were pledged started making margin calls, prompting Vijay Sheth to raise a loan of Rs 240 crore by pledging 5.53 million shares with Bharati Shipyard. Great Offshore shares lost 2.94 per cent today to close at Rs 286.70.
A Great Offshore spokesperson said Vijay Sheth, who continues as the managing director of the company, did not wish to comment on the developments. The market credits him for building a strong entity which reported a net profit of Rs 211 crore during 2008-09, as against Rs 91 crore when it was demerged. Following the sale of 14.89 per cent stake in Great Offshore, he will now be left with less than 1 per cent in the company.
“Shipping is an extremely cyclical industry; building a new business requires exceptional acumen and immensely strong financial power,” said a senior executive at another shipping company. “In Great Offshore’s case, while the business is doing exceptionally well, it is the shortage of funds with the promoter that has pushed him to sell the shares,” he added. The family split has, however, had little impact on Great Eastern Shipping. Following the demerger, the country’s largest private sector shipping company has floated a new offshore business under its wholly-owned subsidiary, Great Ship.
Besides, the company is not looking to make a bid to acquire stake in Great Offshore. Answering a query from Business Standard during a conference call, Great Eastern Shipping Deputy Chairman and Managing Director Bharat K Sheth, who holds around 5 per cent in Great Offshore, said, “This is something we have not looked at; this is not on our radar.”
His brother Ravi K Sheth, who is heading Great Ship, the new offshore subsidiary of Great Eastern, said, “We are quite content with our own offshore venture.” He, however, declined to discuss the affairs of other family members.
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