Loss making for four consecutive years yet, asking 100 times par value! 

Promoters with `proven track record’ of failures can, perhaps, flourish only in this country. And, our inept regulators allow such promoters to go scot-free without even insisting a full disclosure of their past.

• • Another peculiarity of the group is changing the companies’ names. Monali Land and Housing Co became Sayaji Hotels before it went public. Growmore Fertilizers became Hindustan Rasayan and went public in 1995. The name was further changed to Liberty Phosphate and was finally sold to the Murugappa group. Barbeque-Nation was originally incorporated as Sanchi Hotels.

• • Coming to the quality of disclosures and credibility of the promoters, the 1992-IPO prospectus of Sayaji Hotels claimed that there was no listed company under the same management. Come 1995. Hindustan Rasayan prospectus revealed that Divya Chemicals, which raised Rs 9.25 cr through a rights issue in 1992, was a group company, as R R Dhanani was one of the promoters!

• While Barbeque’s offer document presents the financials of Sayaji Hotels, it does not reveal about the performance of the other public companies connected with the Dhananis. What happened to the once listed Divya Chemicals (co-promoted by Dhananis) and M P Agro Morarji (listed company taken over by Dhananis in 1991)? Hindustan Rasayan collected a premium of Rs 10 for a share in 1995 boasting that it was a `profit making dividend paying company’. But, post-public issue, the price dropped to Re 1 in the face of dismal working performance.
• Though Barbeque’s RHP lists Welterman International as a group company, it does not reveal the performance of that company. Welterman, where Barbeque’s MD Kayum Dhanani holds the single largest stake of more than 45%, was last traded at Rs 2.70 against its paid up value of Rs 10. Welterman has accumulated losses amounting to over Rs 17 cr against is capital of Rs 4.44 cr.
• Coming to the prominent listed company of the group, Sayaji Hotels’ consolidated loss has been mounting in last five fiscals. Notwithstanding the poor working performance, its share price has witnessed an upsurge since the filing of Barbeque’s offer document as the company is claimed to be the main promoter of Barbeque. However, the fact is, the listed Sayaji Hotels does not hold any share in Barbeque. Its entire holding of 37.18% has been transferred to its wholly owned subsidiary, Sayaji Housekeeping, at just par value for reasons best known only to the Dhananis. One should not be surprised, if Sayaji Housekeeping is spun off sooner than later to unlock the value.

• When Sayaji Hotels went public in 1992, the promoters had proposed to hold 40%. Post-IPO, their holding dropped to 36.3%. Nevertheless, after the advent of Barbeque, the promoters have hiked their stake to 74.9%!

Valuation 

BNHL is operating in an industry where, except Jubilant Foodworks, no one has a credible profitability to speak about. In such scenario, promoters’ credibility counts a lot. Unfortunately, the track record of the listed companies of Barbeque’s promoters fails to instill confidence.

Concern 

• BNHL has been issued a notice by the National Anti-Profiteering Authority under the Central Goods and Services Tax Act, 2017. On November 30, 2020, NAA has examined the report and ruled that methodology adopted by DGAP while arriving at the demand is incorrect and directed to conduct further investigation. Accordingly, the demand of Rs 32.58 cr has been excluded from contingent liability. Any adverse decision in this matter may have a direct adverse impact on the business, operations, future prospects and financial position, and an indirect impact on the reputation, profitability and business of the company.
• Some of the promoters and directors operate or control entities engaged in a similar line of business, which may lead to competition with these entities and could potentially result in a loss of business opportunity for the public company.
• Promoter-Director, Raoof Dhanani is reportedly involved in a criminal proceeding initiated by Videocon Leasing and Industrial Finance Limited before the Additional Criminal Judicial 
• Magistrate, Ghaziabad in relation to dishonestly inducing Videocon to, inter alia, part with Rs 16 cr for issuance of non-convertible, redeemable Debentures of Divya Chemicals Limited, which were not issued.
• Raoof Dhanani is also reportedly involved in an insolvency proceeding initiated by SICOM Ltd before the High Court of Bombay in relation to recovery of Rs 60 lakh.
• In respect of orders dated December 10, 2015 and May 17, 2016 and show
•  cause notice dated May 17, 2017 issued by SEBI to Sayaji Hotels (SHL), it paid a penalty of Rs 12 lakh on November 9, 2017. Further, in respect of the show cause notice dated February 15, 2017 issued by SEBI, SHL paid another penalty of Rs 15 lakh on March 13, 2018.
• In respect of the show cause notice dated January 4, 2017 issued by SEBI to promoters and promoter group members of SHL, including, Kayum Dhanani and Suchitra Dhanani, a settlement amount of Rs 3.52 cr (including interest) has been paid on September 30, 2019.
• In respect of the show cause notice dated June 27, 2014 issued by SEBI to certain promoters and promoter group members of Liberty Phosphate Ltd, including Raoof Dhanani, they paid the settlement charges of Rs 2.21 cr.
• In respect of the show cause notice dated May 12, 2015 issued by SEBI to Raoof Dhanani, he paid the settlement charges of Rs 13.6 lakh.
• In respect of the show cause notice dated January 4, 2017 issued by SEBI to Raoof Dhanani, he paid the penalty of Rs 16 lakh
• The Income Tax Department, Bengaluru conducted search operations at the residences of certain Directors, certain Promoters, and one KMP and at the Registered and Corporate Office of BNHL between January 10, 2018 and January 12, 2018. Subsequently, assessment proceedings were initiated against the company, pursuant to which assessment orders were passed by the Deputy Commissioner of Income Tax, Bengaluru on December 30, 2019 for each of the assessment years with tax demands aggregating to Rs 15 cr.
• The rating committee of ICRA in a letter dated August 31, 2020 revised the long-term ratings of BNHL to BBB+ from A-. The rating committee also revised the company’s short-term ratings to A2 from A2+. According to ICRA, their outlook on the long-term rating continues to be ‘negative.’