This story first appeared in DNA Money edition on Tuesday March 29, 2011.
DB Realty, the troubled Mumbai-based real estate developer whose name figured in the 2G spectrum investigations, has lost its fourth director since February.
Sundaram V Rajagopal, a non-executive director, submitted his resignation on March 21, which was accepted by the company’s board on Monday, DB Realty informed the stock exchanges. DNA had reported on the possibility of this on February 18.
Rajagopal is currently the managing director of private equity firm Starwood Capital India Advisors Pvt Ltd for India and Southeast Asia. He joined the firm in July.
A DB Realty statement said Rajagopal was appointed as a nominee of Lehman Brothers pursuant to its investment prior to the initial public offering of the real estate company.
“The right to appoint nominee directors by all such investors ceased to exist on October 1, 2010. Post his joining Starwood Capital, his current schedule and commitments do not permit him to continue to be on company board and hence he has taken the decision to resign. DB Realty is in the process of consolidating and reconstituting the board to make it focused,” the company statement said.
Attempts to contact Rajagopal were not successful. However, private equity industry sources, said that Starwood Capital would have directed Rajagopal to resign.
On DB Realty’s future, industry experts feel being a highly owner driven company its promoters will now have to work very hard towards regaining credibility in the market.
“The promoters will probably have to disassociate with the management by bringing in a very professional board that will eventually help the realtor to weather out shadows surfacing time and again. This will not only help in overall business restructuring but also in streamlining the company operations, thereby avoiding a situation wherein the realtor’s development projects will get severely impacted,” said a senior official from an investment firm.
DB Realty was earlier in talks with real estate PE funds to raise money for its government Bandra colony project. While the company management was believed to be in talks with Starwood Capital for a possible placement, industry sources said the deal was not approved by Starwood’s investment committee.
Thereafter, the realtor was understood to be talking to domestic investors to raise Rs600-800 crore in the project. Industry sources, however, believe that Rajagopal’s resignation will only make it tough for the realtor to raise money.
“Going by the uncertainties faced, I don’t think fundraising from domestic or international investors will be possible anymore,” said a real estate analyst from a leading domestic brokerage firm.
Updates from DB Realty Management on March 29, 2011.
Two senior officials of DB Realty - Asif Balwa and Rajiv Agarwal - were arrested by the Central Bureau of Investigation (CBI)today in Delhi. They have been arrested in their capacity as Directors and shareholders of Kusegaon Realty Pvt Ltd. Both Asif Balwa and Rajiv Agarwal on various occasions have cooperated fully with the CBI and continue to do so.
The company maintains that neither official has done anything inappropriate or illegal. The company fully supports them and is offering the best legal expertise. The company has the highest respect and confidence in the Indian legal system and is confident that ultimately the truth will prevail.
DB Realty enjoys immense trust and support from all its stakeholders. The company would like to assure all its stakeholders that the company is managed by a core team of accomplished professionals and thus the day-to-day management is not affected by these developments, all work is carrying on smoothly without any delay.
Interestingly, retail investors seem to have taken fancy to the D B Realty stock which surged 16% and 18.79% on March 29 and March 30, 2011 respectively. It would be interesting to see how the stock progresses in the coming days.