Vadra is right as well as wrong
By Nantoo Banerjee
Delhi businessman Robert Vadra is right. On the face of it, he has done nothing wrong if he has accepted Rs. 65 crore as interest free loan from real estate tycoon Kushal Pal Singh and purchased some grossly undervalued residential and other properties to make a killing as alleged by India Against Corruption campaigners – former taxman Arvind Kejriwal and legal eagle Prashant Bhushan. Singh’s flagship company, DLF stated that the deals with Vadra are totally transparent and above board. There is nothing material to disbelieve Singh, ranked among the world’s 10 richest people last year and known to be one of India’s five-dozen post-economic reform billionaires, about the deals being spotless clean on paper.
Both Singh and Vadra are businessmen. And, in large part, business is all about deal-making. Vadra must have been delighted to clinch those deals with someone who, he claims, is a family friend with whom he also plays golf. The world-over, some of top business deals, including corporate mergers and acquisitions (M&A) take place not in teak wood paneled board rooms but on lush green fairway of golf courses. One may point out that the Singh-Vadra deals were unusually one sided in favour of Vadra.
Robert Vadra must be very happy and proud of his business charisma and strong friendship that he enjoys with a tycoon of Singh’s financial stature which may have made such deals possible. Vadra was no doubt a great gainer from those deals, which might have caused some jealousy among Singh’s other business-golfer friends and as also among corruption crusaders cum snoopers, given the interesting backgrounds of the duo.
Now, the question is: why should Singh suddenly shower a Rs. 200-crore-plus worth composite business gift to this Vadra, who is not known to be under any major financial distress to warrant such a big financial favour from his family friend. On the contrary, Kushal Pal Singh is in a big financial mess himself and would love to find a white knight to come to his rescue. Logically, he could hardly afford to be charitable to such an extent to anyone at this point of time without expecting something much bigger in return.
The business edifice called DLF is under heavy financial pressure itself, causing serious concern to its domestic and overseas lenders. Among the former are several public sector banks. DLF has been trying to bring down the debt by selling investments that it had made over the last few years. Recently, the company sold a plot at Lower Parel in Central Mumbai to Lodha Developers for Rs 2,750 crore. This is not the most appropriate time for DLF’s Singh to offer large charities even if they are in favour of an excellent family friend such as Vadra.
DLF’s debt exposure is said to be to the tune of Rs. 25,000 crore. The interest on these borrowings carries a weighted average of 12.38 per cent per annum. Last financial year, the company’s sales income was Rs. 4,582.67 crore. Thus, the debt turns out to be 5.5 times the company’s annual sales. It is extremely high by any business standard. The company is said to be finding it difficult to bring down the quantum outstanding loans to reduce the interest burden. In the first quarter, it was reduced the borrowings by only Rs. 6 crore. The real estate market continues to be so dull that some of the banks are offering interest free car loan to those who are willing to club it with home loan from the same bank.
DLF also has issues with the union government with regard to the payment of corporate income tax and service tax over the years. In several cases, the company had gone on appeal. The combined tax claims under dispute, according to the latest report by the company’s statutory auditors — Walker, Chandiok & Co – come to a mammoth sum of over Rs. 6,600 crore. The auditors noted that “Without qualifying our opinion, we draw attention to note number 49 of the financial statements in respect of certain income tax and other matters. There exists uncertainty in respect of the final resolution of these material matters, and the resultant financial adjustments if any, will be recorded in the periods in which these matters are resolved.”
Certainly, DLF’s financial woes are not immediately comparable to Vijay Mallya’s Kingfisher, the airline which got grounded under the outstanding loan burden of some Rs. 7,500 crore. Analysts feel that there is nothing very serious to worry about DLF’s finances if the company can bring down its gearing by Rs. 8,000-9,000 crore to a sustainable level of around Rs. 16,000-17,000 crore. And, a shrewd businessman like Singh will spare no opportunity to put the real estate juggernaut back on its track. For all this to happen, he needs friends at right places and also pots of luck. A support to Robert Vadra’s real estate venture at this juncture could be one such gambit. After all, in business there is no free lunch.
Does Singh really expect some return from Vadra in exchange of his sweet gesture to the latter’s enterprise? Or, is it just a conjecture? Vadra has reportedly said : “I have a good understanding with DLF. Our children are friends, we are friends. They are seasoned businessmen. They are not daft. They are educated, sensible people and are reasonable and shrewd in their business. They don’t need me to enhance them. They’ve existed for years.” There is no reason to distrust businessman Vadra although one may argue that his proximity to DLF’s Singh is not delinked with his marital status resulting in a very powerful and high level political connection.
Singh is certainly shrewd, much more than Vadra, the son-in-law of the country’s most powerful political personality, Congress president and chairperson of the ruling UPA at the Centre. Should things further deteriorate for DLF, Vadra could influence the powers that be to see that government banks and tax departments behave more reasonably with DLF. Once again, this is only a conjecture. Yet, a politically wise man would say Vadra, a member of the country’s first political family, would have done well to politely turn down friend Singh’s lucrative offer if he really cared to spare the Gandhi family, the real source of his claim to current fame and to win Singh’s friendship, of a few blushes and the Congress party of a big embarrassment. (IPA Service)