‘Raymond-The Complete Disaster’, Says Minority Shareholder

Letter claims minority shareholders “kept in dark” about company’s finances.

A Raymond store on Bhulabhai Desai Road, Mumbai. (Photographer: Jyotiprakash Raut/BloombergQuint)
A Raymond store on Bhulabhai Desai Road, Mumbai. (Photographer: Jyotiprakash Raut/BloombergQuint)

A minority shareholder in Raymond Ltd. has said that the fabric maker and fashion retailer used company funds to redevelop Chairman and Managing Director Gautam Singhania’s home in Mumbai and to buy yachts and aircraft.

In an open letter, published in Business Standard newspaper on Thursday, the shareholder, Vishal Patel, cited what he says were instances of “imprudent deployment of company’s funds”.

Vishal is related to Bharat Patel, who owns more than 4 percent individually and through his investment arm Finquest Securities in Raymond.

Raymond declined to comment on BloombergQuint’s query about the shareholder’s letter.

The company’s stock ended 5 percent lower on the Bombay Stock Exchange on Thursday compared to a 0.5 percent drop in the benchmark Sensex index.

The letter said the promoters, including Singhania, kept investors in the dark about the company’s dwindling finances and the commercial aspect of the property at Bhulabhai Desai Road, Mumbai, where construction was suspended for a prolonged period. The company failed to give shareholders the reason behind spending Rs 186.7 crore as of March 31, 2016 on redeveloping the property, according to the letter.

The board of directors owe to the stakeholders an explanation and justification towards the rationale for the above project. 
Minority Shareholder Vishal Patel’s Open Letter

Bharat Patel told BloombergQuint that he had “plans of the Bhulabhai Desai property in my possession which show that it is not meant for commercial use but for promoters’ use. This is the most unethical thing to do by a promoter”.

Vishal Patel’s letter was addressed to Singhania, chairman emeritus and his father Vijaypat Singhania, whole-time and independent directors and auditor.

A Raymond spokesperson refused to share contact details of independent directors and the auditor. BloombergQuint’s emails to Gautam Singhania did not elicit any response.

The letter blamed independent directors for allowing capital and operating expenses of assets like boats and aircraft to be charged to the company. The book value of these assets was close to Rs 185 crore, while the company has charged a depreciation of Rs 130.3 crore in the last 10 years.

The only logical reason one can think for having yachts, speed boats and jets is to fulfill the passion of Mr. Gautam Singhania as mentioned in his Twitter profile.
Minority Shareholder Vishal Patel’s Open Letter

According to the letter, the company had a net profit of Rs 197.2 crore in the last 10 years, while in the same period it has charged Rs 327.8 crore as expenses for the assets and additionally Rs 56.17 crore was paid as remuneration to the promoters.

Gautam Singhania’s salary rose 33.7 percent in the financial year (FY) 2015-16 to Rs 11.39 crore, according to the company’s annual report.

The letter also charged the auditor for failing to specify operating expenses separately and “cleverly disguising them under miscellaneous expenses of Rs 293.5 crore in FY16”.

Poor corporate governance and turning a blind eye by the board towards imprudent deployment of company’s funds has resulted in “Raymond-The Complete Man becoming Raymond-The Complete Disaster” for the shareholders.
Minority Shareholder Vishal Patel’s Open Letter

Promoters, including Gautam Singhania, own 42.9 percent stake in the company while foreign and domestic institutional hold 22.46 percent. The remaining 34.61 is owned by retail and high net worth individuals.

‘Raymond-The Complete Disaster’, Says Minority Shareholder