Raymond Seeks To Sell Rs 710 Crore Mumbai Property For Just Rs 7.50 Crore To Promoters
IiAS raises questions of corporate governance at Raymond.
Shares of Raymond Ltd. dropped as much as 9.5 percent in early trade on Thursday, after proxy advisory firm Institutional Investor Advisory Services (IiAS) said a proposed land deal may lead to opportunity loss of more than Rs 650 crore to the company and its shareholders.
Raymond is seeking shareholders’ approval to sell real estate assets in Mumbai to the promoters – the Singhania family – at its annual general meeting on June 5. The proposal states that the Singhania family will be paying Rs 9,200 per square feet, for four duplexes with a total carpet area of 22,400 square feet.
Urging shareholders to vote against the proposal, IiAS said the proposed price is lower than the cost of building the four duplexes.
The company will also have to pay for the stamp duty of the transaction. At current stamp duty rate of five percent in Mumbai, that would amount to Rs 5,850 per square feet. This means that the company will get just Rs 3,350 per square feet or Rs 7.50 crore for the four duplex flats.
All out-of-pocket costs, charges and expenses including the stamp duty and registration charges of and incidental to this agreement shall be borne and paid by the developer, Raymond had said at the annual general meeting.
The advisory firm said Raymond’s valuation report states that the residential property is valued at Rs 1,17,000 per square foot (built up), putting a value on the entire transaction at Rs 710 crore.
“Transaction could lead to an earnings-per-share (EPS) loss of Rs 4 per share to the company,” the advisory firm told BloombergQuint. “We advise shareholders to get a sense of what is the board’s stand on this matter,” it added.
Raymond’s Response
The company released a statement saying the promoters will abstain from voting on this particular issue, in keeping with good corporate governance practice.
