Golden Tobacco To Sell Its Real Estate Assets

In an attempt to prevent a hostile takeover bid from Pramod Jain, Golden Tobacco’s management has decided to either sell or develop four of its five real estate properties.

The company owns real estate properties in prime areas and Pramod Jain – who owns about 6.5% stake in the company had made an unsolicitated open offer to acquire a substantial stake in GTL so that he could prevent the company’s assets from being sold after defaulting on loans to a host of lenders.

GTL will either develop or sell its properties in Guntur, Hyderabad and Marol (Mumbai). It will however, not sell its 7.7 acre factory in Vile Parle (Mumbai). It also has a factory in Vadodara. The company will obtain shareholder’s approval for its proposal for real estate development as the current norms restrict the company from selling its assets during an open offer.

Jain and his companies, Pranidhi Holdings and JP Financial Services, acquired a 6.47% stake in GTC when Mr Dalmia wasn’t able to redeem 890,000 shares pledged with unkonown lender. He launched a open offer in November to acquire 4.4 Mn shares at Rs 101 per share. The deal would cost Pramod Jain $9.49 Mn, valuing the company close to $38 Mn. The open offer opens on Dec 30 and closes on Jan 08.

Pramod Jain’s bid, which is 2000 times the company’s EPS of 5 paise for the last fiscal, clearly indicate that the offer was for the real estate assets of the company and the decision of selling or developing the properties will definitely hurt Pramod’s ambitions. The financials of GTC are also not that great.The company’s net profit tumbled 98% to Rs 25 lakh in March ‘09 from Rs 13.03 crore in the previous year.

GTL has been using its real estate assets for raising capital for the company. In 2008, It raised Rs 11 Cr from SBI by mortgaging its factory in Vadodara. In 2007, it raised Rs 20 Cr from Indiabulls Housing Finance Ltd by mortgaging its Marol property.

It also raised Rs 650 Cr from Indiabulls group, but Indiabulls sued Dalmia claiming that he had duped the company of Rs 225 crore by allegedly mortgaging bogus property documents, however both the parties reached at an out of court settlement on Dec 14. As per the terms of the settlement, Dalmia furnish an additional mortgage of Rs 235 Cr to Indiabulls. He will will pay Rs 25 Cr immediately and repay the entire loan by April 2010.

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