Nov. 12: A little-known investor from Delhi has teamed up with a small financier from Howrah to launch an audacious takeover bid for Sanjay Dalmia-owned Golden Tobacco Ltd (GTL), which produces Panama and Chancellor cigarettes.

At the centre of the hostile takeover bid is Pramod Jain — a 43-year-old financial services consultant based in Delhi’s Green Park Extension — who has cornered a 6.47 per cent stake in GTL along with a Calcutta-based ally.

Jain, who resigned as director of Dalmia-owned Gujarat Heavy Chemicals Ltd (GHCL) on April 30, has joined hands with Howrah-based JP Financial Services Ltd to float an open offer to acquire another 25 per cent — or a maximum of 44,02,201 shares — from public shareholders at Rs 101 a share.

The Dalmias, who hold 27.19 per cent of the tobacco maker’s equity, have been pledging shares to borrow money to tide themselves over a difficult period for producers of non-filter cigarettes after former finance minister P. Chidambaram whacked them with a heavy excise duty in February 2008.

Dalmia was not available for comment. However, he told a television channel that he wasn’t worried by the takeover attempt as he had a comfortable stake in GTL along with his friends.

Late in the evening, Pramod Jain told The Telegraph that the open offer was launched to scuttle any move by the promoters to sell its land assets.

“Dalmia has taken a Rs 500 crore loan from Indiabulls and the two are now fighting. I am worried that the promoter may sell the land,” Jain said.

“Dalmia has failed miserably. In a democratic set-up, anyone who is competent should run the plant,” he added.

JP Financial Services is registered with the Reserve Bank of India as a non-banking finance company.

When contacted, Manoj Chandak, director of JP Financial, said Jain was the key person behind the move.

“We are only supporting the takeover bid initiated by Pramod Jain. JP Financial had offered the loan to Golden Tobacco in early 2008.”

Old foe?

Last year, there was strong speculation that Jain was planning to mount a takeover attempt on GHCL when his shareholding had crossed 10 per cent in the soda ash maker.

Although recent shareholding data of GHCL does not show either Jain or his group companies as shareholders, JP Financial Services Pvt Ltd still remains a shareholder. Data from the Bombay Stock Exchange show the company held 3.69 per cent in GHCL for the period ended June 30.

Pledged shares

JP Financial Services had provided a loan of Rs 8.5 crore to the Dalmias against a pledge of 8,90,000 GTL shares. The Howrah-based firm already owned 2 lakh shares in the company.

It invoked the pledge in February after a loan repayment default — marking the start of a nine-month saga during which Jain and his buddies have been stalking the Rs 130-crore tobacco maker.

JP Financial Services currently holds 10,90,000 shares in GTC, while Jain appears to hold a little over 49,000 shares that he and his firm — Pranidhi Holdings Private Ltd — acquired through market purchases.

Data with the bourses reveal that the Dalmias have pledged another 5,28,000 shares with lenders. It isn’t known whether this stake has also been pledged with Jain and his friends.

The GTC stock leapt 5.04 per cent on the National Stock Exchange to Rs 109.35 after today’s announcement. Trading in the stock was halted after it hit the circuit filter.

On the Bombay Stock Exchange, the GTC stock rose almost 5 per cent to Rs 109.40. Golden Tobacco is a stock listed on the BSE 500 index.

Hard times

The 54-year-old tobacco maker had notched up revenues of a little over Rs 130 crore in the year ended March 31.

The company’s net profit tumbled 98 per cent to Rs 25 lakh from Rs 13.03 crore in the previous year.

In their report appended to the balance sheet for 2008-09, Golden Tobacco’s auditors Lodha & Co had said the company would have suffered a loss of Rs 12.84 crore (against a reported net profit of Rs 25 lakh) if it had made provisions for liability for future gratuity payments of Rs 13.09 crore.

The company made no provision which, the auditor said, ran counter to accepted accounting practice.

The GTC stock has been on a huge rollercoaster over the past 18 months: it closed at Rs 678.85 on January 7, 2008 after hitting an intra-day high of 710. However, on March 9 this year the scrip plunged to a low of Rs 36. It has since recovered and recently crossed the Rs 100-mark.

The company has blamed its dwindling fortunes on the change in the excise duty on plain cigarettes in February 2008.