Why Raymond’s Minority Shareholders May Not Benefit Much From Land Sale
JK Investo, an associate firm of Raymond, sold about 20 acres of land in Thane to Virtuous Retail South Asia for Rs 700 crore.
Shares of Raymond Ltd. jumped the most in a year after an associate of the fabric maker and fashion retailer sold the land reserved for a residential project in Maharashtra for Rs 700 crore. But the minority shareholders of the listed entity may not benefit much from the deal.
JK Investo Trade (India) Ltd. sold 78,310 square metre, or about 20 acres, of land in Panchpakhadi, Thane, to Elpis Ventures, an affiliate of Virtuous Retail South Asia Pte Ltd., Raymond said in an exchange filing. Shareholders of JK Investo, in which Raymond holds 47.6 percent, had approved the sale in June. JK Investo, according to its annual report for 2017-18, recorded a net book value of the land at Rs 3.52 lakh.
While Sanjay Bahl, chief financial officer at Raymond Group, said the transaction is in line with the company’s strategy to unlock shareholders value and reduce debt, he expects the deal to attract a 33 percent tax, implying that JK Investo would receive a net Rs 465 crore.
“Once the proceeds are received on completion of the deal, the board of JK Investo would take a call on distribution of the proceeds (from the land sale),” Bahl told BloombergQuint. The transaction, he said, is expected to conclude in a couple of months.
BloombergQuint’s calculations show that given Raymond’s 47.6 percent stake in JK Investo and factoring in an expected dividend distribution tax of 18 percent, the fabric maker will only receive about Rs 180 crore.
On Wednesday, Raymond shares rose 10.1 percent to Rs 601.85 apiece on the BSE while the benchmark Sensex gained 1.72 percent to end the day at 38,177.95 points. The stock had risen as much as 12.2 percent intraday.