Radha Kishan Damani’s D-Mart made a blockbuster entry into the stock market with ‘Avenue Supermarket’ soaring more than 100 per cent on its listing day. This stellar debut took his net worth beyond $5 billion, taking him to the top 15 billionaires in India ahead of stalwarts like Anil Ambani, Rahul Bajaj and Ajay Piramal. A silent giant of the market rose to fame with his retail chain listing on the stock exchange.
But it has not been an overnight journey. 16 years back, he surprised everyone by making an aggressive bid for VST Industries, then controlled by British American Tobacco (BAT). Damani’s closely equated people were surprised by his hostile bidding, quite opposite to his calm and composed nature.
Through his investment company Bright Star Investments, Damani had acquired a 15 per cent stake in the company at a price of 88 per share over a year. He was now bidding for another 20 per cent stake in the company at 112 per share, a massive 26 per cent premium to the market price. ITC entered the bidding war to counter Damani, which might be due to self-interest. Damani had to face obstacles to execute his game plan.
ITC initially made an offer at Rs 115 per share and later increased that to 126 per share. Damani eventually raised the price and size of his bid to 151 per share for 30 percent of the company but failed to get over the banks, insurance companies and financial institutions that together held 22 percent in the company. Bright Star managed to increase its stake to around 20 percent through its offer making his total investment in the company around 31 crores, but Damani’s dream of owning a controlling stake in VST couldn’t be turned into reality.
Bright Star added another 4 per cent from 2003-2005 at a share price ranging from 90-350 for around 20 crore. And another 2 per cent stake from 2007-2009 at a price of 210-350/share making another investment of approx. 12 crore. That would make his total investment to 63 crore.
VST Industries in now trading more than Rs 2850 per share and a 26 per cent share makes his investment close to 1150 crore which is almost 18 times. Also, he pocketed around 175 crore through the hefty dividends over the last decade making his acquisition cost less than zero/share.
VST industries proved to be a good investment with good cash flow and entry barrier for foreign companies, though he would have liked a controlling stake more. He has established himself as a value investor and is a mentor to Indian Warren Buffet, Rakesh Jhunjhunwala.
BW Reporters
The author is a correspondent with BW Businessworld with keen interest in HR and employee welfare.
