Supriya, Sadanand Sule invested Rs 1.66 lakh, made Rs 18.64 crore in Lavasa deal: report

Mumbai, Oct 21: Supriya and Sadanand Sule, the daughter and son-in-law of NCP supremo Sharad Pawar, made Rs 1.12 lakh for every Rs 100 share they held in the company Yashomala Leasing and Finance Pvt Ltd, after it merged with Lavasa Corporation, and from which they later exited, Business Standard reported on Sunday. The couple got sweetheart deals in Lavasa, not once but twice, says the report. 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. 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.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, the exit price could not have been lower than Rs 106.67 a share. 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. The newspaper said, both Supriya and Sadanand Sule and Lavasa Corporation did not respond to their e-mails for their version of events. The report said, 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. A look at the history behind Lavasa: Pearl Blue Lake resorts was incorporated in February 2,000. In December the same year, the name was changed to Lake City Corporation. In December 2001, there was capital infusion in 2 tranches (1.49 million shares at Rs 58.34 per share and 0.74 million shares at Rs 73.35 per share. In January 2002, the board approved merger with Yashomala. In August the same year, Bombay High Court approved merger at a swap ratio of 1:750. In October the same year, Supriya and Sadanand Sule got 1.24 million Lavasa shares in exchange for 1,665 Yashomala shares. In September 2003, Lake City promoters HCC bought 1.5 milion shares at Rs 106.67 in secondary sale. From March to September 2004, the promoters bought 750,000 shares at the same price. In June 2004, Lake City was renamed Lavasa Corporation. In November the same year, the promoters bought 49,000 shares @ Rs 120.68 a share. In September 2005, the promoters sell the entire secondary market purchase of 29.99 million shares at Rs 120.68 a share.