Director Rajgopal quits DB Realty; Bandra project on shaky ground

The spate of top-level resignations at DB Realty continued on Monday as the company's board accepted the resignation of non-executive director Sundaram Rajagopal, who is also managing director of private equity firm Starwood Capital for India and Southeast Asia. He had put in his papers on 21 March.

Rajagopal's is the third recent high-profile exit from DB Realty's board. Last month, Shahzad Dalal, vice chairman and managing director of IL&FS Investment Managers, and Chandan Bhattacharya, former State Bank of India managing director, resigned as directors.

The Mumbai-based Dynamix Balwas (DB) group is in the thick of the 2G spectrum scam, as it is the majority owner of telecom company Etisalat DB. Its former managing director Shahid Balwa was arrested last month in connection with the so-called scam, where companies were allotted spectrum and licences allegedly out of turn and without fulfilling the rules.

According to a DB Realty statement, "Rajagopal, a non-executive director of DB Realty, was appointed as a nominee of Lehman Brothers, pursuant to their investment in DB Realty prior to the IPO. As per the SSA (share sales agreement), the right to appoint nominee directors by all such investors ceased to exist on October 1, 2010. Post his joining Starwood Capital, his current schedule and commitments do not permit him to continue to be on board of DB Realty, and hence, he has taken the decision to resign from the board. DB Realty is in the process of consolidating and reconstituting the board to make it focused."

Shares of DB Realty, which had been sliding heavily, regained as much as 20 per cent on Tuesday morning, after Rajgopal's resignation became public. Observers say that Starwood must have directed Rajgopal to resign from the DB board.

There were reports that Starwood had withdrawn from DB Realty's Bandra Government Colony redevelopment project in Mumbai, where it was an investor. In response, DB Realty waffled by saying, "Starwood Capital is considering investment in the Bandra Government Colony Project and we have signed a non-binding term sheet with them. Due diligence is currently in process. And we have not received any information from them about backing out of the deal.''

DB Realty was earlier in talks with real estate PE funds to raise money for its government Bandra colony project. While the company management was believed to be in talks with Starwood Capital for a possible placement, industry sources said the deal was not approved by Starwood's investment committee.

Thereafter, the realtor was understood to be talking to domestic investors to raise Rs600-800 crore in the project. Industry sources, however, believe that Rajagopal's resignation will make it tougher for the realtor to raise money for the project.