Top billionaire investor and D-Mart promoter Radhakishan Damani opposed the candidate for chairmanship proposed by British American Tobacco (BAT for its Indian unit VST Industries Ltd, leading to his rejection at a shareholder vote, according to voting disclosures and an executive privy to the development.
Opposition from Damani, who owns nearly a third of India’s third largest cigarette maker, marks a rare episode of opposition from the investor who holds more than 1% shares in 11 publicly listed companies.
BAT, the promoter of VST Industries with 32.16% shareholding, first appointed its executive Naresh Kumar Sethi as director on the board of the Hyderabad-based cigarette maker in November 2018. VST sought shareholder approval to reappoint Sethi as executive chairman from non-executive director for five years from 5 November.
However, Damani opposed Sethi’s appointment. Among non-institutions who own 56.9% of VST, 95% voted against Sethi’s candidature. Despite 91% approval from public institutions, which own 10.9%, and the promoter voting for the resolution, Sethi’s appointment failed to pass, since it got only 56% votes. Special resolutions require approval from 75% of shareholders.
Damani’s opposition to Sethi’s candidature as chair implies that the largest public shareholder of VST industries is not aligned with BAT’s decision.
“Damani is concerned about the strategy of VST and how they intend to grow the business,” a company executive said on the condition of anonymity.
Emails sent to Damani, BAT and VST Industries managing director Aditya Gooptu remained unanswered.
“This is a rare instance, if not the first, of a significant shareholder opposing the resolution, which eventually led to the resolution being defeated,” said Shriram Subramanian, founder and managing director of proxy advisory firm InGovern Research. “Damani appears to be unhappy with the redesignation of the BAT nominee and the lack of transparency in how the board of VST Industries went about the process.”
BAT’s share
At the end of September, BAT owned 32.16% of VST Industries, employees owned 0.19%, and public investors the remaining 67.65%. In his personal capacity, Damani owned 3.15% and 25.95% through his investment firm Bright Star Investments Pvt Ltd, bringing his total ownership to 29.1%.
Damani’s opposition to an essential resolution at VST Industries comes after he sold 3.24% in the last two years. Until September 2022, Damani owned 32.34%, more than promoter BAT’s ownership in VST Industries.
VST Industries, which owns the Charms brand of cigarettes, reported 9.8% growth in business, ending with ₹1,837.5 crore in revenue from operations in FY24. However, its total cigarette sales fell 3.2% from 8.25 million cigarettes in 2023 to 7.98 million last year. Profit after tax declined 7.8% from ₹327 crore to ₹301.6 crore.
Tobacco biz grew
ITC’s tobacco business grew 8.5% last year to ₹30,596.6 crore, while profitability improved 6.5% to ₹19,089 crore. Godfrey Phillips India Ltd, which sells cigarettes under the Four Square and Red & White brands, ended last year with ₹4,820 crore in revenue, a 26.6% increase from the ₹3805 crore in FY23.
Over the last five years, shares of VST Industries have lagged behind their peers and the Sensex: VST Industries shares declined 12.3% between 20 December 2019 and 20 December this year. During this time, shares of ITC, a diversified conglomerate, and Godfrey Phillips India returned 93% and 304%, respectively. Sensex is up 87.2% during this time.
According to a review by Mint, Damani, who promotes and owns 74.65% of Avenue Supermart Ltd, also owns more than 1% of 11 publicly listed companies, including 3M India Ltd, Trent Ltd, Mangalam Organics Ltd and Advani Hotels & Resorts Ltd.
