The promoters and extended family of fabric and apparel maker Raymond Ltd are trying to acquire premium real estate from the company at throw-away rates, according to a report published by Mumbai-based proxy advisory firm Institutional Investor Advisory Services (IiAS).
The sale of four duplex apartments in JK House in the tony south Mumbai neighbourhood of Breach Candy to the promoters will cost the company, and its shareholders an opportunity loss of ₹650 crore, the report by IiAS said. It has asked minority shareholders to vote against the resolution proposing the sale of the real estate at the company’s AGM on June 5.
According to the IiAS report, titled Raymond Limited: The Complete Rip-off: “Raymond Ltd’s own valuation report states that the residential property is valued at ₹1,17,000 per square foot (built up), putting a value on the entire transaction at ₹710 crore. Raymond, however, proposes to sell the property to the Singhania family factions for ₹9,200 per square foot of carpet area — an over 90 per cent discount to market rates.” IiAS estimates the opportunity loss at over ₹650 crore, which is large in the context of Raymond’s own limited size: it aggregates over ₹100 per share.
Raymond has spent ₹270 crore — not including the land cost — on rebuilding JK House, it said. The sale price of ₹9,200 per square foot is lower than JK House’s average cost of construction, estimated at over ₹11,000 a sq ft. If the company were to sell the properties at market value, it would more than recover its cost of development, it said.
IiAS’ report is based on an open letter published by minority shareholder Vishal Patel to the board of Raymond Ltd, which first brought these allegations to light. Patel said the company had “poor corporate governance” and that the Board of Directors “was turning a blind eye to the imprudent deployment of company funds”.
Since the proposed sale is a related-party transaction, only minority shareholders will vote on the resolution. IiAS’ report also said that the company made inadequate disclosures on its plan for the property in the past.
Also, IiAS said it was not clear if Raymond’s audit committee had approved the transaction. “The quality of board oversight at Raymond Ltd is of concern if the board is unable to separate the interests of the company and its promoters,” it said.
Promoter’s statement In an emailed statement, Gautam Hari Singhania, CMD, Raymond Ltd, said: “We adhere to the highest level of corporate governance. Consequently, and given that the offer required to be made by the company under the tripartite agreement pertaining to JK House is a related party transaction... the Raymond audit committee and board of directors have ... deferred the matter to shareholders for decision.
“All relevant facts pertaining to this matter have been set out in the AGM notice for shareholders to take a considered view. Needless to say, the promoters, being interested parties, will abstain from voting on this matter.”
Shares of Raymond Ltd closed up 2.53 per cent at ₹680.15 on the BSE on Thursday.