Mumbai: In the ongoing controversy over Raymond Ltd’s proposed sale of JK House to members of the promoter Singhania family, chairman and managing director Gautam Singhania has urged shareholders to vote against the sale.
In an email statement to the media, Singhania said he personally did not approve of the transaction but will abstain from voting on it during the company’s upcoming annual general meeting as he is an interested party.
“The tripartite agreement entered in year 2007 between the company, lessor and occupants, all of whom were related parties, to offer apartments for sale at a substantial discount to the current prevailing market prices which would cause a major loss to the company and shareholders,” Singhania said in the statement. “Keeping this in mind, the company decided not to act on this agreement.”
This 2007 agreement was signed between Raymond that owns JK House, its subsidiary Pashmina Holdings Ltd that leased JK House from Raymond, and four members of Gautam Singhania’s immediate family, including his father Vijaypat Singhania and cousin Akshaypat Singhania. Pashmina Holdings sub-let the four duplex flats to these four family members from 1994 onwards at a rent of Rs7,500 per month per flat. The 2007 agreement said that once renovations of JK House were complete (on Raymond’s expense), the four duplex flats will be sold to their tenants at Rs9,200 per sq. ft of carpet area.
“Needless to say, as a related party I am required to abstain from voting on this resolution,” Singhania said in the statement. “However, my personal opinion would be to vote against the resolution in interest of the shareholders and company.”
In a notification for an annual general meeting, Raymond has proposed to sell JK House to the four sub-lessees for Rs9,200 per sq. ft, asking shareholders to vote for or against the transaction. The meeting will be held on 5 June.
Last year, three of the four tenants of JK House—Vijaypat Singhania, Akshaypat Singhania and Veenadevi Singhania—wrote to Raymond “exercising their option to purchase the new apartments”. Akshaypat, Veenadevi and Anant Singhania have now filed two arbitration petitions before the Bombay high court in a rapidly escalating Singhania family feud. Raymond (representing interests of Gautam Singhania and his branch of the family) is fighting against these petitions.
This is the latest in a long family dispute over property business rights between two factions of the Singhania family—Vijaypat Singhania (whose son Gautam Singhania is now CMD of Raymond) and the wife and children of his brother Ajaypat Singhania.
Raymond first bought the South Mumbai property JK House in 1945 as a residence for the company’s promoters and directors. It has four duplex flats, a museum and a flagship Raymond store.
Corporate governance firms have criticized the proposed transaction, citing loss to shareholders from an undervalued sale and the questioning why promoters of Raymond had a home on the company’s expense.
Proxy advisory firm IiAS wrote in a note on 24 May that this price would be at a 90% discount to the prevailing market value, causing an “opportunity loss” of nearly Rs650 crore to Raymond’s shareholders. It recommended that shareholders vote against the transaction, calling Raymond “The Complete Rip-Off”.
Another proxy advisory firm Stakeholder Empowerment Service (SES) said in a note dated 5 June that “right from the beginning”, the proposed transaction was “abusive in nature”.
“Why and how property of a public company be allowed to be used exclusively by directors and their family (?),” asked the note. “The lease rights of Pashmina Holdings must be cancelled and same way sublease agreement with other related party be cancelled.”
The note also said that the proposed sale price of Rs9,200 per sq. ft was arbitrary and that the company had provided no information on how it was arrived at.
“If that is the fair price, even SES would like to purchase flats in JK House,” the note said. “And there would be many more willing buyers willing to do so. This very clearly indicates that price is not fair but favourable to promoters,” the note said, urging shareholders to vote against the transaction.