Dunlop's property play

When Pawan Kumar Ruia bought Dunlop from the Chhabrias two years ago, a section of analysts felt that the main attraction for the Kolkata promoter would have been the acres of prime real estate in the Dunlop fold rather than the iconic brand itself. Those analysts weren’t wrong.

With property prices having zoomed to heady levels, Ruia has found a simple way of healing the hitherto sick company. He’s revalued its land assets. Recently, Dunlop realised Rs 230 crore from partrevaluation of two properties—one in Worli in central Mumbai and the other a block of land in Chennai near Athipattu. These properties have been transferred to four new subsidiaries: Dunlop Properties, Dunlop Infrastructure, Dunlop Estates, and Bhartiya Hotels.

The exercise has ensured a positive net worth for the company (which had become a stretcher case); last year the company posted a Rs 78-crore net profit. “This financial reengineering was done to bring Dunlop out of the purview of the BIFR (Board for Industrial & Financial Reconstruction),” explains Dhrubajyoti Nandi, Vice President, Corporate Communications of the Ruia Group.

However, property and its mind-boggling values can also lead to issues, and Ruia has his fair share of them. Dunlop now finds itself in the midst of a battle with a company called VGN Enterprises, which had bought 60.86 acres of land from the tyre maker in 2004, when it was still owned by the Chhabrias. This land was apparently sold at that time in accordance with a plan laid down before BIFR to revive the company.

VGN was the highest bidder and paid Rs 24.34 crore for the land. But Dunlop is now saying that the sale is null and void; and it has dug out an old deed of assignment by the Tamil Nadu government made in 1963, which states that any land held by the company should be either used by it or returned to the government. Dunlop is keen to ‘repossess’ the land. The reason is fairly obvious: The property is now worth Rs 300 crore.

The first question that comes to mind is: Didn’t the Ruia camp know about this sale when buying Dunlop from the Chhabrias? The new management admits that it had done due diligence before buying out Dunlop—and were well aware of this sale—but did nothing about it then. Ruia’s men, it would appear, raked up the issue three years later last fortnight when VGN began to fence the land. According to Dunlop India, the BIFR and the Apellate Authority for Industrial and Financial Reconstruction sanctioned the sale of land in a routine manner “without noting the incurable infirmities”, hence the sale was null and void. Dunlop went to the Madras High Court with a petition objecting to the sale, only to have it dismissed immediately.

The company has now gone to the Executive Magistrate’s court at Ponneri (a suburb off Chennai), which has instituted an interim order that status quo should be maintained in the disputed land pending an enquiry by the Revenue District Officer. Whose land is it will hopefully be determined soon, but in the meantime, the fact that Dunlop was once a premier tyre maker is being forgotten pretty rapidly.