How R.K Damani fought ITC and made over 25x return investing net ‘Zero ₹’ !?
3 min read
How Billionaire Investor R.K Damani fought ITC, insurers, banks over a cigarette company & made over 25x returns by paying effectively net Rupees ‘Zero’ over 20 years!?
After the Harshad Mehta’s scam of 1992 and Ketan Parekh’s scam of 2001, R.K Damani – who’d made loads of wealth after these crashes had already gained a “cult status” on Dalal Street as a fiercely successful trader and visionary value investor. Today, the modest and humble billionaire investor, entrepreneur, owner of the supermarket chain D-mart, once upon a time also dreamt of owning controlling stakes in a ‘cigarette company’ – A dream that came very close to reality but remained a dream.
The Story:
It all began back in February 2001, Radhakrishna Damani decided to launch a hostile bid to take over VST Industries. Even Damani’s closest associates were surprised by this act of aggression, completely contradicting his soft-spoken nature. Swiftly, he already acquired approx 14-15% stake in VST Industries via his ‘investment company’ – Bright Start Investments. R.K Damani began to aggressively corner more and more shares of VST Industries for the next few years.
VST was trading at around ₹85-₹90 per share during those years, however, Damani was willing to pay a premium up to 26% and buy at even at ₹112 per share to acquire more than 20% stake in the company. British American Tobacco (BAT) which owned a majority stake in both ITC (around 29% today) and VST Industries (around 32% today) decided to tackle Damani on this aggressive bid. So, BAT via ITC attempted to launch bids to acquire a 20% stake in VST at even a 30% market premium for ₹126 per share!
Damani rarely learned to lose, he fought back to lock horns & claws with the multinational BAT and upped his bid to ₹151 per share, to acquire a 30% stake in VST Industries Ltd. But with too many key decision-makers involved in the transactions and a chunk of 22% controlled by banks and insurance companies who refused to give into Damani’s demands (decisions that might be aligned with political reasons). Thus, the attempt of a hostile takeover of VST Industries by the ace investor fell through the cracks.
Two decades have gone by, and Damani consistently cornered shares of VST Industries Ltd at most possible stages during the years and currently owns around 30% total stake in VST as of December 2020. He owns around 5% in his personal capacity and around 26% via ‘Bright Star Investments’ – his investment company. This total stake is valued at over ₹1,823 Crores as of December 2020! VST industries today – The share price has gone from ₹90 to approx ₹3,800 in 17 years (till December 2020). And, is among the top 3 cigarette manufacturers in India and fastest growing company in the sector, even beating ITC in growth rate and PE multiples.
As per calculations from various leading market coverages, R.K Damani paid effectively Zero for these stakes acquired over the past 20 years. Because in summary, only ‘dividends received’ by Damani from his holdings in VST Industries till 2016 have netted ₹175 Crores in comparison his total stake purchases through 2001 to 2016 have cost him less than ₹65 Crores!
