BSE-listed Gaurav Mercantiles, which was earlier into trading and shipbreaking, has not made a single rupee of revenue from operations since the March 2018 quarter, but its stock price has shot up six times in the past year — from around Rs 40 to Rs 262.50 on Wednesday.
The reason for the steep appreciation is a change of hands and the entry into a new business. Raghav Bahl, who had founded the Network18 Group that was later acquired by Reliance Industries, bought 66.42 per cent stake at Rs 42.50 a share for Rs 5.6 crore in Gaurav Mercantiles from its erstwhile promoters in 2018. The transaction was completed in January 2019 and, soon after, shareholders approved its entry into media and entertainment business.
On Wednesday, its board approved a proposal to acquire The Quint news portal and certain affiliated websites from another company owned by Bahl. An exchange notification said the board had okayed the acquisition of the digital content business from Quintillion Media on a slump sale basis.
Bahl and wife Ritu Kapur are promoters of both Quintillion Media and Gaurav Mercantiles.
Quintillion Media operates The Quint, its Hindi version, and health and wellness site FIT, which would form part of the transaction.
BloombergQuint, the joint-venture with the international terminal provider Bloomberg, is not part of the acquisition.
Bahl will buy additional shares in the company at Rs 42.50 a share through compulsorily convertible preference shares (CCPS) and warrants, both at a conversion price of Rs 42.50 per share.
The company’s share capital will rise from 2 million shares to 18.5 million shares. Bahl and Kapur will buy over 60 per cent of the new shares, while chairman of the company, Mohan Lal Jain, will own 4.99 per cent stake. Jain, a chartered accountant, is also on the board of Quintillion.
The acquisition of The Quint is at an enterprise value of Rs 30.6 crore and an equity value of Rs 12.6 crore. The company says it will provide it a “strong foothold in the digital media business of the economy”.
Quintillion had been running losses in some of the investments it had made.
Bahl has also faced regulatory scrutiny in the past few years. There have been investigations by the income-tax department and the Enforcement Directorate. The Securities and Exchange Board of India also initiated a probe into share trading in PMC Fincorp amid accusations of alleged tax evasion or money laundering.
Bahl’s joint venture BloombergQuint shuttered its television division in April after being unable to procure a broadcasting licence from the government. The Quint has also reportedly furloughed a few staffers in the aftermath of Covid crisis.
At Gaurav Mercanitiles, Bahl has brought in other investors in the CCPS and warrants, including members of the Agarwal family, the promoter group of Haldiram's, and Mauritius-based foreign portfolio investor Vespera Fund, which is connected with Elara Capital. E-mails sent to them remained unanswered.
Bahl, in an emailed response to a query from Business Standard, said Haldiram's and Elara were public investors playing a passive part. "They do not have any other role to play in the company," he said.
Meanwhile, Gaurav Mercantiles' board on Wednesday approved the change of its registered office from Maharashtra to the National Capital Territory of Delhi. It also approved the change in the company’s name subject to regulatory approvals.