Corporate Oct 12, 2012
The more the media probes the DLF-Robert Vadra property deals, the more doubtful does the explanation given by DLF look when juxtaposed against Vadra's corporate balance-sheets filed with the Registrar of Companies (RoC). (You can read it all here)
Today's Business Standard and The Economic Times offer new angles to their stories published earlier this week.
Doubts are now arising over the following:
One, who actually financed Vadra's company Sky Light Hospitality to enable him to buy the Rs 15.38 crore property in Manesar (Village Sikohpur), Haryana, which was subsequently sold to DLF for Rs 58 crore in 2008-09?
Two, why did DLF pay higher-than-market prices for the Manesar land?
Three, in another deal, how can DLF claim it sold a luxury apartment in its Aralias complex in Gurgaon to Vadra at Rs 12,000 per square foot when it said almost two years earlier that all the flats were completely sold out for an average price of Rs 2,548 per sq ft?
A few days ago, Business Standard, quoting from a Sky Light balance-sheet, suggested that Corporation Bank's Friends Colony branch might have advanced Vadra an overdraft of Rs 7.94 crore which may have been used to buy 3.5 acres of Manesar land that was subsequently sold to DLF for a huge profit.
Today, the newspaper reports that Corporation Bank flatly denies having given the overdraft to Vadra's company. The bank said: "We have gone though (sic) our records and do not find that any such facility was granted to M/s Sky Light Hospitality as has been reported."
So does this mean Vadra's balance-sheet statement filed with the RoC is misleading? Or is the bank HQ unaware of what its branch did? If the bank did not give the money, how did Vadra buy the land?
Both RoC and the Reserve Bank have some poking around to do here.
Another Business Standard report suggests that the flat in The Aralias project sold to Vadra could not have come directly from DLF. The newspaper quotes DLF's IPO prospectus which claimed, in January 2007, that "All the apartments in The Aralias have already been sold." The Draft Red Herring Prospectus shows The Aralias as being among the "completed projects", with a sales value of Rs 400 crore being reported at an average price of Rs 2,548 per sq ft.
If these flats were already completed and sold, how does this square with DLF's statement last week that the flat was bought by Vadra in September 2008, unless it was a second sale. DLF said: "Mr Vadra purchased one apartment for his personal use in Aralias in September 2008 at the then prevalent market price ofRs12,000 psft (per sq ft). The total purchase consideration ofRs11.90 crore was paid by Mr Vadra, for which the apartment was conveyanced in his favour."
Did DLF actually sell the flat to Vadra in September 2008 when it had already sold everything out (according to the prospectus, read here), or did it convince an early investor to on-sell the apartment to Vadra? Some clarity is required here. DLF's statement said: "We may also mention that while Aralias was initially launched atRs1,800 psft, Mr Vadra's purchase atRs 12,000 psft is among the highest prices at which the company sold the apartments in Aralias."
Here the company is clearly saying that it (i.e. DLF ) had sold the flat, and not some investor who bought it earlier. Something doesn't add up here. Sebi should be nosing around here, too.
The Economic Times points out yet another incongruity in the Sikohpur/Manesar land deal. Today's paper says that DLF paid more for the 3.5 acres in Manesar. It quotes property dealers in the area as saying that land in 2008-09 did not cost more than Rs 1,500 per sq ft, but DLF paid Vadra Rs 2,800 per sq ft (psf).
DLF said in its statement last week: "The average cost of the licensed property in the hands of DLF works out to approxRs2,800 psf of FSI, which was comparable with similar transactions in that area. The price of the said property has significantly appreciated today to the benefit of DLF and its shareholders."
But ET quotes Anckur Srivasttava, a real estate consultant, as saying that "the FSI cost in that part of Gurgaon was not more than Rs 1,500 per sq ft then and is not more than Rs 2,500 per sq ft today."
In short, not only did DLF pay a handsome price then, but it is handsome even by today's prices.
From Sky Light's balance-sheet, it was always clear that Vadra turned a Rs 15.38 crore investment into a Rs 58 crore sale - for a profit of over Rs 42 crore.
Now, this stands confirmed from the ground too. Vadra did get an overpriced payoff from DLF.
More From R Jagannathan.