Uneasy Moves

RATAN Tata’s uneasiness about how vulnerable Tata companies may be to takeovers is reflected in the group’s recent moves. The fear of takeovers is something the group has lived with for some years, given that the Tata shareholdings are quite low in the companies promoted by the group.

In May 1988, when a Rs 26.81-crore issue of convertible debentures by ACC failed to generate enough enthusiasm from the average investor and the financial institutions, the company offered to sell the unsubscribed-to bonds in bulk to interested parties.Applicants included the Calcutta-based Swarups, promoters of Paharpur Cooling Towers; and a company called Kachaldara Trading. Smelling a rat, ACC chief Nana Palkhivala checked out Kachaldara’s antecedents. The company was a wholly-owned subsidiary of Bombay Burmah Trading, which was part of the Nusli Wadia group. Kachaldara had a paid-up capital of Rs 2 lakh, reserves of Rs 15 lakh, and had applied for ACC debentures worth Rs 7 crore! ACC rejected the offer—Palkhivala called it "a genuinely, positively benami application"—and won the subsequent court case. Meanwhile, ACC also woke up to the fact that the Swarups, by buying a large chunk of debentures, had overnight become the largest non-institutional stakeholders in ACC, owning 7.13 per cent of the company! Hectic negotiations followed, and the Tata group bought back the Swarups’ stake through a company called Sabras Investments, controlled by Tata Chemicals bossman Darbari Seth. The Swarups had bought at Rs 125, sold at Rs 201, and made a neat profit of about Rs 3 crore within a month!

In 1994, Business Today published an interview with Ratan Tata, which quoted him as saying that a businessman—who appeared to the reader to be Swraj Paul—was planning a hostile takeover of Tisco. Tata vehemently denied that he had mentioned anything during the interview, the magazine stood by the story.