IiAS warns of Rs 650 cr loss for Raymond in selling JK House

Raymond Ltd's move to sell its premium property 'JK House' in Mumbai to its promoters and their extended family will result in loss of over Rs 650 crore for the company and its shareholders, proxy advisory firm IiAS has said.
Raymond stock came under huge selling pressure, plunging nearly 10 per cent in early trading session today following the IiAS warning.
The stock, after making a weak opening, further plummeted 9.83 per cent to Rs 598.10 on BSE. Later, it recovered the losses and was trading about a per cent higher at Rs 669.50 in the afternoon.
"In its forthcoming AGM on 5 June 2017, 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. Should this transaction go through, IiAS estimates that it will result in an opportunity loss of over Rs 650 crore for the company and its shareholders," IiAS said.

It further said: "Raymond Ltd'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 7,100 crore".
It added: "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."

JK House is located at Breach Candy, Mumbai.
Raymond spokesperson, in an email reply said: "We adhere to highest level of corporate governance. All relevant facts were put forth in the AGM notice to the shareholders much before any report was published, to take an informed decision. Needless to state that the promoters, being interested parties, will abstain from voting on this matter."

IiAS said Raymond has spent Rs 270 crore -- not including the cost of land -- in rebuilding JK House. The proxy advisory firm recommends voting against this transaction.
It also alleged that the company's board has failed to protect the interests of the minority shareholders.
"From the perspective of transparency and good governance, the board has failed in discharging its fiduciary responsibilities towards shareholders. The quality of board oversight at Raymond is of concern if the board is unable to separate the interests of the company and its promoters," IiAS said.
It also questioned fairness of the company's audit committee, whose members include Vijaypat Singhania, a direct beneficiary of the transaction.

IiAS said 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.
"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.