Harish Bhasin's firm starts to exit from DCM Shriram

The stock price of DCM Shriram has rallied more than 180% since April last year

Signaling an end to years of hostile takeover battle, late Harish Bhasin’s HB Stockholdings has started exiting the Delhi-based DCM Shriram Industries. The former broker’s firm has sold 10 per cent of its shares in the sugar and chemical maker at a premium in the last two quarters. It has raised around Rs 12 crore, while its stake has come down from almost 25 per cent last year to 22.39 per cent as on March 31. At current prices, the 22.39 per cent stake is valued at Rs 128 crore.

The stock price of DCM Shriram has rallied more than 180 per cent since April last year to hit a record high of Rs 335 in February this year. The stock has surged more than 500 per cent since August 2015, making it attractive for HB Stockholdings to look at exit options. It has sold 424,000 shares since October, BSE data showed.

It is understood that HB Stockholdings wanted to sell the entire shareholding to an institutional investor but could not convince the management of DCM Shriram to meet the potential investors. The company then decided to start selling the shares in the open market. Since DCM Shriram is not a very liquid share, it may take a while before HB Stockholdings completely exits the firm. The company continues its efforts for a bulk exit. DCM Shriram, like stocks of most sugar companies, has seen a strong rally in recent quarters due to a dip in output after years of surplus. Prices have moved up sharply, helping many sugar companies, especially those with operations in Uttar Pradesh, to post record profits. Accordingly, investors have been betting big on sugar stocks. DCM Shriram made a profit of Rs 96 crore in April-December of FY17, against a profit of Rs 9 crore in the corresponding period of FY16. 

Anil Goyal, director at HB Stockholdings, did not comment on the stake sale. Goyal last year said his company might make a full or partial exit from the stock at an appropriate time. It could be done through open market or a private placement, he said. Tilak Dhar, promoter, chairman and managing director of DCM Shriram, could not be reached for comment. The promoters have 44.52 per cent stake in the company. HB Stockholdings had acquired about 12 per cent stake in DCM Shriram between 2007 and 2008 at an average price of Rs 125 a share. It hasn’t gained much after spending crores to ramp up the stake except for a few crores in dividends. 

The company does not have a board representation in DCM Shriram.

Harish Bhasin, who was once a broker for the London-based non-resident Indian Swraj Paul, had made takeover attempts on DCM and Escorts in 1983. While, the attempts were foiled due to government intervention, he was left with 12.87 per cent in DCM Shriram Industries, one of the splinter groups formed after the split of DCM in 1990.

In 2007, Bhasin’s firm raised its stake to 25 per cent through open market purchase and an open offer. Alarmed at this, the promoters upped their stake from 32.54 per cent through an issue of warrants. Harish Bhasin then approached Company Law Board claiming the move was against the interests of the minority shareholders. The case is still pending. Bhasin passed away in December 2010. His son, Lalit Bhasin, is the chairman of HB Stockholdings.

ENTRY & EXIT
 

• After being stuck in a takeover battle for years, HB Stockholdings is selling its stake in DCM Shriram industries.
• 1983: Stockbroker and promoter of HB Stockholdings Harish Bhasin attempts to take over DCM and Escorts; stopped by government intervention
• 1990: DCM splits; Bhasin left with 12.87% stake in DCM Shriram Industries
• 2007: Bhasin’s firm raises stake to 25%; alarmed, promoters raised their stake from 32.54%; Bhasin tells Company Law Board move against minority shareholder interest
• 2016/17: Shares of BSE-listed DCM Shriram Industries rallies by over 180%; HB Stockholdings sells 424,000 shares