The TVS group is one of the oldest and most respected business families in India. TVS Electronics is one of their listed companies. Unfortunately the shareholders have been taken for a ride recently.
In 1999, TVS Electronics, a listed company paid Rs 10 crores to ICL foundries to acquire 6 acres of commercial land in Nandambakkam, which is close to Guindy. This property is shown as an asset of Sravanaa Properties, which was earlier a 100% owned subsidiary of TVS E.
As per reports in the Economic Times, the group has been trying to sell this land since Sept 2007. The upset price is Rs 225 crores, and they are close to clinching a deal with Ascendas, which is a renowned Singapore realty firm. Sounds great news for TVS E shareholders. But there is a sting in the tail.
Through a board resolution on 13 August 2007, the stake in Sravanaa Properties has been divested by TVS Electronics in favour of TVS Investments for a consideration for Rs45.50 crores to meet the long term fund requirements of TVS Electronics. The group had an upset price of Rs 225 crores, but they were happy to sell the stake to an unlisted group entity for Rs 45 crores !!
It is worthwhile to understand some corporate developments which took place in the case of TVS Electronics during the August 13, 2007 meeting. (http://www.bseindia.com/qresann/newsh.asp?newsid={5171DFA9-AB41-4B4A-85A8-BB70A99D1D8A}¶m1=1). The firm transferred the assets in Sravanaa Properties and TVS Finance to TVS Investments Ltd for a total consideration of 60 crores.
Subsequently in Nov 07 the firm issued a statement that TVS E does not own the land in Chennai (http://www.bseindia.com/qresann/newsh.asp?newsid={2075BE77-829E-4361-80D0-ED5C76EF43A8}¶m1=1)
Several questions could be raised about these transactions:
1. If the TVS Group had any intention of selling this property in the near future, why did they divest their stake in the company, Sravanaa properties. Instead of subscribing for the preferential allotment, TVS Investments has taken over the prime assets of TVS electronics at almost one-fourths of current market price. The irony is that the current market price is much lower than what it would have been 9 months ago when the real estate prices were ruling high.
2. If the TVS Electronics is dire need of funds, it should have borrowed from the market or taken a loan from any TVS Group company. Instead they sold their family silver to run the business?
3. Regarding the sale of TVS Finance and Services Ltd's shares, four months down the line, TVS Investments makes an open offer for the same shares of TVS Finance and Services Ltd., at Rs26/- per share, again at agreat dis-advantage to TVS electronics shareholders.
The way in which the TVS Group has treated TVS Electronics shareholders is very disappointing. They used TVS Electronics funds of Rs10 crores to buy the land from ICL Foundries in 1999, and finally when they were about to hit a goldmine, TVS Group has silently transferred the property to an unlisted group company. Probably, all these transactions would be within the rules of the law but not definitely in the right spirit!!
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