DB Realty investors in a fix over exit

Investors in DB Realty, the company whose promoters Shahid Balwa and Vinod Goenka are in jail in connection with the 2G spectrum scam, are in a fix over how to exit from their investments. The company's stock price has fallen sharply.

Though lock-in periods of investors, such as IIRF Holdings VI managed by IL&FS Investment Managers, and Trinity Capital Eleven, floated by London's AIM-listed Trinity Capital, got over in February, they are uncertain over the exit, say two persons familiar with the developments. DB Realty came out with an initial public issue (IPO) in January 2010, implying a lock-in period of a year for its investors.

The company's stock has fallen nearly 32 per cent from the beginning of February this year. The stock fell 13 per cent on March 28 after the company announced that Sundaram Rajagopal, managing director, Starwood Capital and director on DB Realty's board, had also quit.

In 2007, Trinity, along with IL&FS, picked up 5.92 per cent in DB Realty (DBR) for £25.72 million (approximately Rs 295 crore). DBR was a $1-billion special-purpose vehicle (SPV) then and developing 12 realty projects in and around Mumbai. However, both entities have increased their holdings since then. As on March 31, IIRF Holdings owns 4.05 per cent stake in DB Realty while Trinity Capital Eleven holds 4.66 per cent. While Trinity's stake is valued at Rs 118.50 crore at today's share price, IIRF's stake stands at Rs 102.92 crore.

An IL&FS executive said, “We invest to exit from our investments at a later date. But under the current circumstances, we are waiting and watching.”

DB Realty is in the news for the alleged involvement of its promoters and other key executives with the

2G spectrum scam. At present Balwa, Goenka, CFO Asif Balwa, are in judicial custody, undergoing investigations by CBI.

Trinity Capital, in a previous regulatory filing with London's Alternative Investment Market (AIM), said TC 11 (Trinity Capital Eleven) will retain a professional advisor in due course in connection with sale of its investment.

When contacted about Trinity's exit from DB Realty, the director, Trinity Capital and MD, IOMA Fund Management, Philip Scales said, “In accordance with London listing rules, Trinity does not comment publicly on its individual investments except through the regulatory news service of the LSE.”

Including Trinity and IIRF, other major investors in the company are Walkinson Investments, Bollywood Mauritius, Mavi Investment, Janus Contrarian Fund and others who hold a total 27.14 per cent stake in the company. A close look at the stock holding pattern of the company shows that between December 31, 2010, and March 31, 2011, an entity called Shanmuga Real Estate and Promoter Pvt Ltd has come under the bracket of “public and those holdings more than one per cent stake''. Shanmuga holds nearly 1.7 per cent stake.

DB Realty is also seeing the exits of its directors who are involved with some of its investors. This February, the company announced that Shahzad Dalal, vice-chairman, IL&FS Investment Managers, has quit.