Another independent director on the board of IL&FS Private Equity and Trinity Capital-backed real estate firm DB Realty has quit. Michael McCook, a senior advisor at Trikona Advisors (former investment advisor of Trinity Capital) and a former senior investment officer (real estate) at CalPERS, has quit the board, leaving just two independent directors functioning for the company.

This raises serious questions over the fate of the existing investment by Trinity Capital and IL&FS Private Equity in a firm that has lost nearly half a dozen directors in the past few weeks. This follows both co-promoters of the company (including Shahid Balwa, who was once India’s youngest billionaire) being placed under judicial custody over alleged financial irregularities that caused loss to the Indian exchequer in the 2G telecom spectrum auctions.

McCook is the fifth board member to step down in the last three months from the firm that went public last year. Most recently, Sundaram V Rajagopal, managing director of Starwood Capital India Advisors, who was on DB Realty’s board for the last four years as a non-executive director, has stepped down from the post. Earlier, Rajagopal was a nominee director of Bollywood Mauritius Holdings (a Lehman Bros entity), another financial investor in DB Realty before its IPO. Last October, he ceased to be a nominee director of the realty firm and was appointed as an additional director (independent non-executive director).

The exodus started in early February when Shahzaad Dalal, vice-chairman of IL&FS Investment Managers Ltd (IIML), resigned as an independent director of the firm. Dalal was earlier a nominee director of IL&FS Trust Company Ltd and IIRF Holdings VI Ltd while Mahesh Gandhi was the nominee of Trinity Capital (Eleven). Both were appointed as additional directors (independent non-executive director,) from November 1, 2010. Gandhi continues to be on the board.

Pravin Rathod, who was appointed alternate director to Mahesh Gandhi, ceased to be a director on the board of the company. Another independent director Chandan Chattacharya, former MD of SBI, had also quit in February.

DB Realty scrip, which lost over three-fourth of its value since last October, had seen some bottom fishing after it hit a 52-week low on March 29 and was trading at Rs 105 levels in early morning session on Monday, down 0.66 per cent from previous close. All the pre-IPO financial investors have an average cost of purchase of Rs 190 per share, according to VCCircle estimates, which means they are sitting on unrealised loss of around 45 per cent.

IIRF Holdings, an investment arm of IL&FS Private Equity-managed fund, owns 4 per cent stake in DB Realty while Trinity Capital held 4.6 per cent stake as of March 31, 2011. However, the company has witnessed a decline in institutional holding for the last four quarters on the trot.

In a separate statement, DB Realty has inducted the fathers of the two co-promoters as additional directors on the board. Krishna Murari Goenka (father of Vinod Goenka) and Usman Balwa (father of Shahid Balwa) have joined the board from April 21, 2011. “Both of them have vast experience, maturity and business knowledge, which will immensely benefit the Company,” DB Realty said.

Early last month, Shahid Balwa stepped down from the board. According to the company’s disclosures, it has just five board members now including Vinod Goenka and two independent directors – retired bureaucrat Karun Srivastava and Mahesh Gandhi (of Trinity Capital), besides the two additional directors appointed last week.

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