Shares of Raymond came under massive selling pressure today, plunging nearly 10 per cent in early trading session after proxy advisory firm IiAS warned that a proposed real estate deal will result a loss of over Rs 650 crore for the company and its shareholders.
Shares of Raymond came under massive selling pressure today, plunging nearly 10 per cent in early trading session after proxy advisory firm IiAS warned that a proposed real estate deal will result a loss of over Rs 650 crore for the company and its shareholders. The stock after making a weak opening, further plummeted 9.83 per cent to Rs 598.10 on BSE. Later, it recovered early losses and was trading 0.59 per cent higher at Rs 667.25.
On NSE, it tumbled 9.68 per cent to Rs 598.10. Raymond Ltd earlier this month informed BSE that the annual general meeting (AGM) of the company will be held on June 5.
In its forthcoming AGM on June 5, Raymond has presented a resolution to make an offer to sell its premium real estate at throw-away rates to its promoters and their extended family, Institutional Investor Advisory Services (IiAS) said in a report.
“Should this transaction go through, IiAS estimates that it will result in an opportunity loss of over Rs 6.5 billion (Rs 650 crore) for the company and its shareholders,” it added. IiAS also recommended voting against the transaction.
JK House is a recently-rebuilt building located at Breach Candy, Mumbai. Raymond’s own 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, as per the advisory firm.
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Raymond, however, proposes to sell the property to the Singhania family factions for Rs 9,200 per square foot of carpet area – an over 90 per cent discount to market rates, it said. The advisory firm has estimated that the opportunity loss at over Rs 650 crore, which is large in the context of Raymond Limited’s own limited size, it aggregates over Rs 100 per share.
The sale price of Rs 9,200 per square foot is lower than JK House’s average cost of construction, estimated at over Rs 11,000 per square foot, it said. If the company were to sell the residential properties at market value, it would more than recover its cost of development, the report added.
IiAS believes that from the perspective of transparency and good governance, the board has failed in discharging its fiduciary responsibilities towards shareholders. “Raymond’s shareholders must engage with the company and seek the removal of promoters from the audit committee and the nomination and remuneration committee, and ask for both committees to be comprised only of independent directors,” the report said.
“These measures will ensure that the committees are devoid of any potential conflict. They must also seek to separate the role of Chairperson and Managing Director and push for a non-family Chairperson who can provide stronger oversight over the Singhania family and one that can separate the interests of the company and its promoters,” it added.