Sheth dispute sails to a close

MUMBAI: The Three-Year old dispute in the Sheth family, which controls India’s largest private shipping company, has finally had a happy ending. On Tuesday, the Sheth cousins swapped their shares in Great Eastern Shipping Company (GE Shipping) and Great Offshore (GOL), bequeathing management control and ownership of each company in the two different factions of the warring cousins.

KM Sheth, chairman of GE Shipping, and his sons — Bharat, deputy chairman and managing director, and Ravi, director, sold their 14.5% stake in Great Offshore to Vijay Sheth, for Rs 478 crore — that is at Rs 869 per share.
GE Capital, Infrastructure Leasing & Financial Services (IL&FS) and Motilal Oswal Financial Services funded Vijay Sheth’s purchase of the GOL stake. While IL&FS coughed up Rs 225 crore, GE Captial (Rs 115 crore) and Motilal Oswal (Rs 60 crore) brought in the rest. Vijay chipped in with Rs 78 crore. Around 55 lakh shares of GOL were traded at Rs 869, making the Rs 478-crore deal one of the largest in recent times.

Sources said Deutsche Bank provided the guarantee, as the shares, now held by Vijay through the two investment companies, Maltar and Delta, would be pledged with the financial investors. The deal, which was co-ordinated by Motilal Oswal, was awaiting a formal approval from the Securities and Exchange Board of India (Sebi).ET broke the story on June 7. Over the last two years, ET has always been the first with breaking stories on GE Shipping.

KM Sheth, currently the non-executive chairman of GOL, is expected to step down from the board soon. Tapas Icot, president (shipping) of GE Shipping, who is the other nominee on the GOL board, will also step down. Vijay, who already owns around 5% in GOL, will now hold around 20%.

“This was one of the most complex promoter financing, in the absence of substantial collateral,” said sources close to the deal.Meanwhile, GE Shipping has decided to invest heavily in the offshore sector. The company on Wednesday informed the stock exchanges that it would invest around Rs 590 crore in the wholly owned subsidiary Greatship (India) Ltd (GIL) as equity contribution. Around Rs 305 crore has already been infused towards equity subscription at a premium of Rs 90 per share.

Earlier, the Sebi panel allowed Vijay to buy out GOL shares held by the KM Sheth faction without triggering an open offer. This paved the way for Vijay’s takeover of GOL after two years of its demerger from the parent GE Shipping, and ending an acrimonious family feud.

Vijay had approached the market regulator seeking exemption under the takeover code from making an open offer to the remaining shareholders. In case of an interse transfer of stakes between promoters, the takeover code does not apply, though an exemption from Sebi is necessary.

This follows an informal ‘scheme of arrangement’ reached by the warring Sheth cousins, under which Vijay takes majority stake in GOL, in an all-cash deal.

Earlier, both Bharat and Ravi had given Vijay a couple of months time before which he had to arrange for GOL’s buyout. “The deal would have been done two years ago and brought an end to the dispute, had it not for ONGC, which put a spoke in the plan,” said sources.

ONGC, GOL’s major customer, had forced promoters of GE Shipping to continue invested in GOL, as the offshore division prior to the demerger used to enjoy the financial and performance guarantees from India’s largest private shipping company. ONGC demanded and got the consent of the KM Sheth faction that they will continue as the promoters and main shareholders of GOL. This was a big setback to Vijay as the earlier scheme of arrangement for de-merger had envisaged him as the lead promoter and key shareholder of GOL.

Despite being given a separate business, Vijay ended up in a minority position. On the flip side, ONGC’s resistance acted as a “blessing-in-disguise” for Bharat and Ravi, who ended up having majority stake in both GE Shipping and GOL.