Supriya and Sadanand Sule, daughter and son-in-law of NCP President Sharad Pawar got sweetheart deals in Lavasa, not once but twice. First, their shares in Yashomala Leasing and Finance Pvt Ltd (YLFPL) were swapped for those of Lavasa Corporation at a favourable ratio of 1:750 in 2002. This merger gave the Sules a 20.81 per cent stake in Lavasa Corporation, then known as Lake City Corp Pvt Ltd. Later, the promoters themselves bought shares at a substantial premium, setting the benchmark for the Sules’ exit at a premium.
The facts become interesting in the context of police officer-turned-activist Y P Singh’s recent allegations of irregularities in Lavasa deals having benefited the NCP leadership.
According to a scheme of merger approved by the Bombay High Court in August, 2002, Lavasa issued “750 equity shares of Rs 10 each and 1,600 redeemable preference shares of Rs 10 each at a premium of Rs 10 per share… to the shareholders of YLFPL for every one equity share of Rs 100 held by the then shareholders of YLFPL”. Thus, for one share worth Rs 100, the Sules got Lavasa equity shares worth Rs 7,500 and preference shares worth Rs 32,000.
Source: Draft offer document
Further sweetening the deal, just a month prior to the board meeting (January 2002), in which the merger with YLFPL was approved, in December 2001, Lavasa had issued shares at Rs 73.35 each. Thus, one Rs 100 YLFPL share held by the Sules multiplied into 750 Lavasa shares worth Rs 55,012.50.
Assuming the Sules exited in 2003-04, as claimed by the NCP spokesperson on Thursday, the exit price could not have been lower than Rs 106.67 apiece. Because, that is the price at which the promoters bought some 1.5 million shares in September 2003. It is not clear if the Sules exited the company through this transaction. At this price, one Rs 100 YLFPL share eventually fetched Rs 80,002.50. In addition to this, 1,600 redeemable preference shares would be worth another Rs 32,000, assuming there was no further appreciation in value.
According to the draft offer document filed by Lavasa Corporation in September 2010, “pursuant to the merger of Yashomala Leasing and Finance Pvt Ltd with our company 1,248,750 equity shares were issued to Sadanand B Sule jointly with Supriya Sule”.
At the swap ratio of 1:750, this means the couple held 1,665 YFLPL shares between them worth Rs 1.66 lakh at face value. Thus, an investment of Rs 1.66 lakh in YLFPL zoomed to Rs 18.64 crore. Of this, Rs 13.32 crore came from their Lavasa equity holding, while the preference share holding of 2.66 million alone was worth Rs 5.32 crore.
Emails seeking comments sent to spokespersons of Lavasa and HCC did not elicit any response. Sadanand and Supriya Sule did not respond to an emailed questionnaire on Friday evening and text messages sent on Friday as well as Saturday. A person familiar with the transactions said the merger was done in a transparent manner and was approved by court. Two other couples who were shareholders in YFLPL also seem to have enjoyed similar appreciation. Aniruddha P Deshpande and Sona Deshpande and Vinay V Maniar and Ruchira Maniar also were issued exactly the same number of shares issued to the Sule couple, according to the scheme of merger.
As on the date of the draft prospectus, Vinay Maniar held 28.89 million shares amounting to 5.95 per cent stake in Lavasa. Thus, even if they had sold in 2003-04 as claimed, the Yashomala shareholders got a sweetheart deal, though the sum is small. If they sold at the valuation at which Axis entered, then it is another matter altogether.