Super-Max promoter eyes PE Actis’ stake amid feud

MUMBAI: A tussle has erupted at the

Super-Max Group

, the world’s second-largest razor blade manufacturer, between its promoter Rakesh Malhotra and private equity investor Actis. Malhotra has accused the British fund of shareholder oppression and mismanagement. Malhotra, who remains executive chairman of Super-Max, has also alleged that Actis was attempting to oust him and wrest control of the business. He has moved courts against Actis in and outside India for breach of contract, restriction of his rights and value erosion of Super-Max. Actis currently holds 40.17% in Super-Max while Malhotra owns the balance 59.83%. Malhotra has moved the

National Company Law Tribunal

(NCLT), seeking multiple reliefs, including a possible buyback of shares held by Actis, which he fears the latter could sell to a rival.

Actis has been one of the earliest foreign private equity firms to buy into Indian companies, but has had its share of disputes with some local partners. The London-based investor had emerged as a big shareholder in Punjab Tractors, Halonix (formerly

Phoenix Lamps

),

Nilgiri Dairy

and

Paras Pharmaceuticals

, among others. Actis, managing assets worth over $7 billion, has gone quiet on fresh Indian investments in the past few years amid a top deck churn.

In the petition filed with the NCLT, Malhotra has said that despite repeated attempts, Actis’ representative wouldn’t attend board meetings to discuss Super-Max’s performance and the way forward. A source added that the board hasn’t met since December 2016 even as the company’s performance and cash flows deteriorated. Malhotra’s petition further alleged that Actis was seeking his removal as chairman before agreeing to any fresh fund infusion and was harassing employees who were aligned with him.

Between fiscals 2012 and 2016, Super-Max’s sales and operating profit declined to $123 million and $10 million from $211 million and $27 million respectively. When contacted, Actis communications and brand director John Thompson said the firm would not comment on its investments. The board meetings couldn’t be conducted as the shareholders’ agreement mandates the presence of at least one Actis nominee. Actis has two board seats on Super-Max, but it has nominated only one person on the company.

The source quoted earlier said that when Actis was given the stake in Super-Max, it was expected that the firm will recover its investment from the revenues generated from the business. But with revenues and operating profit declining, the valuation of Super-Max has taken a hit. The company was valued at $770 million when Actis initially purchased 29% stake in December 2010. Super-Max’s CEO and CFO are both appointees of Actis and Malhotra has no say in these two key managerial positions. The source said that the shareholders’ pact states that Actis can exit Super-Max through an IPO or selling back to Malhotra or an external party. It seems that Actis wants to sell the entire business to a strategic suitor and has been in discussions with

Gillette

and

Emami

for the same, he said. Gillette and Emami couldn’t be reached for immediate comments.

The latest feud comes at a time when global private equity funds have returned to chase Indian buyout opportunities after mounting attacks on corporate governance standards in mid-cap and family-run domestic businesses.

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