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Proxy advisory firm warns against Raymond’s proposed real estate sale

LiveMint logoLiveMint 25-05-2017 Soumya Gupta

Mumbai: Proxy advisory firm Institutional Investor Advisory Services (IiAS) has issued an annual general meeting (AGM) notice, warning shareholders of Raymond Ltd against the sale of company-owned real estate that the firm has proposed in an upcoming AGM.

Titled Raymond Limited: The Complete Rip-Off (a play on the company tagline ‘The Complete Man’), the report draws attention to Raymond’s proposed sale of four duplex apartments in JK House, located in South Mumbai’s Breach Candy area, by the company to its promoters and their extended family, all part of the promoter Singhania family.

“Raymond Limited’s own valuation report states that the residential property is valued at Rs1,17,000 per square foot (built up), putting a value on the entire transaction at Rs7.1 bn (Rs710 crore),” the report said. “Raymond, however, proposes to sell the property to the Singhania family factions for Rs9,200 per square foot of carpet area—over 90% discount to market rates.”

IiAS said that it estimated the opportunity loss from this transaction to Raymond shareholders will be worth over Rs650 crore, “which is large in the context of Raymond Limited’s own limited size: it aggregates over Rs100 per share”.

IiAS added that Raymond had spent Rs270 crore, not including the cost of land, on rebuilding JK House. The advisory firm recommended voting against the transaction as “the board has failed to protect the interests of the minority shareholders”, the report said.

In an AGM notice filed with the stock exchanges on 15 May, Raymond informed shareholders that it was seeking approval for the sale of the 1,916.65 square yards JK House at 59-A, Bhulabhai Desai Road that the company had bought in 1945 for “residence of its directors”. The property includes four duplex flats, a retail shop on the ground floor and a museum. The notice also said that four members of the promoter Singhania family—Veenadevi Singhania, Vijaypat Singhania, Madhupati Singhania, and Akshaypat Singhania—had been subleasing these flats through a subsidiary called Pashmina Holdings Ltd since 20 April 1994, paying a rent of Rs7,500 per month per flat to the company.

“We adhere to highest level of corporate governance. All relevant facts were put forth in the AGM notice to the shareholders much before any report was published, to take an informed decision,” a Raymond spokesperson said in an email statement. “Needless to state that the promoters, being interested parties, will abstain from voting on this matter.”

The Raymond scrip opened at Rs629 a share on Thursday. Shares of Raymond were trading 1.26% lower from its previous close at Rs655 per share at 2:04pm, while the benchmark BSE Sensex was up 0.90% at 30,575.70 points.

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