The Subrata Roy-led Sahara Group, which is fighting Sebi over returning Rs 24,000-and-odd crore to nearly 30 million investors in optionally fully convertible debentures (OFCDs) issued by two of its group companies, has probably been less than truthful in its statements to the Supreme Court.
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| This is the state of 186-acre plot where Sahara claims to be developing commercial projects and residential apartments including group housing branded villas, luxury apartments, club and hotel in the projects. |
A INN investigation, however, suggests that the group may have grossly overvalued some of its real assets in order to show that it can meet its Rs 24,000 crore liabilities to OFCD investors. These liabilities arose out of the ‘illegal’ issue of bonds without Sebi sanction to around 30 million investors between 25 April 2008 and 13 April 2011. Sebi, in an order issued in June 2011, asked the two companies to refund the money, and the Supreme Court upheld this in August 2012.
INN went to look at just one of the assets declared by Sahara in its affidavit to the Supreme Court and found reasons to doubt their authenticity.
First, the group has shown the value property purchased for around Rs 62 crore at Rs 1,436 crore on its books – a 23-fold paper profit without doing anything on it. Even at current market rates of land in the area, the value would not be more than Rs 550-560 crore.
Second, some pieces of the land were bought on the same day – one from a man and the other from his widow. Did she sell the plot on the same day her husband died?
Three, some of the sellers who allegedly sold the land to Sahara were untraceable at the addresses mentioned. And so it goes.
Now, for the details.
Twelve real estate companies of the group had acquired 186 acres of land, most of it in Gurgaon, in phases by 2007. Land mutation documents available with INN confirm that Sahara had paid nearly Rs 62 crore for this land over a stretch of time. These 12 companies are Sahara Constructions Pvt Ltd, Sahara India Residential Holding Pvt Ltd, Sahara India Prop (P) Ltd, Sahara India Dev (P) Ltd, Sahara India Real Estate (P) Ltd, Sahara India Commercial Corporation Ltd, Sahara Structurals Pvt Ltd, Sahara Township Pvt Ltd, Sahara Residentials Pvt Ltd, Sahara Complex Pvt Ltd, Sahara Land Arts Pvt Ltd, and Sahara Enclave Pvt Ltd.
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| How did Sahara but a plot of land from a man and his widow on the same day? Did she sell the plot on the same day her husband died? |
So how did Rs 62 crore become Rs 1,436 crore? Easy. Just sell the development rights to a group company for the bloated sum. Sahara, it seems, manufactured a deal to sell this 186-acre plot to Sahara India Real Estate Corporation (SIREC) – one of the two companies that raised over Rs 17,000 crore in OFCDs – for Rs 1,436 crore. Quite clearly, this was an in-house deal, and the valuation does not have arm’s length validity to it.
In the 4 January 2012 affidavit, Sahara had listed “nine jewels” in its kitty - real estate projects or assets – which had been acquired with OFCD investors’ money.
And the affidavit gave an undertaking that these nine assets were sufficient to guarantee the payment of over Rs 17,650 crore due to SIREC investors, and the balance Rs 6,370-and-odd crore to Sahara Housing Investment Corporation (SHIC) investors, making for a total of over Rs 24,000 crore). The nine jewels (ground under various heads) included a Sahara project in Aamby Valley (Maharashtra), the 186-acre plot in Gurgaon, 64 Sahara housing projects in 64 cities and 15 more city home projects in 15 other cities – the whole lot being valued at over Rs 36,000 crore.
Apart from the nine jewels, the companies’ other assets were Rs 23 crore invested in units of mutual funds, Rs 125 crore invested in partnership firms, Rs 204 crore given out as loans and advances and Rs 1,665 crore in cash and bank balances, fixed deposits and other current receivables.
But, surprise! Today, Subrata Roy claims that only Rs 2,560 crore is due to investors out of the Rs 24,000 crore he had indicated as on 31 August 2011. (The Supreme Court order came a year later).
So, logically, one would have expected his nine jewels – or many of them – to be sold off to pay off investors.
But all his nine jewels are intact and Subrata Roy claims he has disbursed his liabilities ‘in cash’ to several crore investors since August 2011. Where did this cash come from?
INN’s investigations into the 186-acre plot in Gurgaon bordering Delhi (in Sectors 111 and 113) not only reveal gross overvaluation of the asset (as indicated above), but the 12 Sahara companies that had originally bought this land may have made a huge margin by selling development rights to group company SIREC for Rs 1,436 crore. The implication: SIREC investors were sold an inflated asset.
This 186-acre plot is located behind Village Chouma in Gurgaon’s Palam Vihar. The plot is not developed yet and there is no construction whatsoever. Sahara contractors had put the barbed wire around it, but the villagers have cut the wire and use the land as a kind of kuccha road in the absence of any other approach road.
The Sahara affidavit had painted this picture of this plot. “The project is spread on land parcels of approximately 186 acres and is to be developed as commercial space and residential apartments, including group housing, branded villas, luxury apartments, club and hotel projects.’’
Haryana’s Town Planning office confirmed that the Sahara group has ‘no licence’ to execute this project! And the land use shown in the records is still ‘agriculture’.
“Sahara India had applied for a plotted colony of 119 acres on 21 June 2011 and for a group housing colony of 17.12 acres on 23 October 2012 in Sector 111 and Sector 112 in Gurgaon. Field reports for both have been received and cases are under examination. Licence has yet not been granted,’’ says Anurag Rastogi, Secretary, Haryana’s Town Planning Department.
According to land mutation documents, Sahara’s first foray into Gurgaon’s 186-acre plot began some time in 1997-98 with one Rajiv Saxena transferring a few acres to Sahara. This transfer did not involve any money transaction.
Interestingly, another person, Nishith Joshi, also contributed about seven acres of land to Sahara. The Delhi addresses of both – Nishith Joshi and Rajiv Saxena – are incomplete in the land records.
Sahara built up its real estate empire around the transferred land in Gurgaon. Twelve real estate companies of Sahara were unleashed to cajole farmers into selling their land. According to the land records, Sahara bought two acres of land from Sahib Singh on 24 December 2003. But the same land records show Sahib Singh as dead, and it appears that Sahara bought land from Ramrati, widow of Sahib Singh, also on the same day! In 2003, the Sahara group of companies purchased nearly 25 acres of land for just Rs 4.20 crore from local farmers.
The plot further swelled with the acquisition of 10 acres of land for merely Rs 1.37 crore in 2005.
Sahara hit the bull’s eye in 2006, when it managed to acquire over 100 acres of land for Rs 31.22 crore. And in 2007, when property prices were scaling new heights, the final deal was sealed with the purchase of 10 acres for Rs 25 crore. This was the front end of the 186-acre plot and thus had cost more to than the rest.
The final purchase value paid for the land is about Rs 62 crore. The market value of the land has, meanwhile, increased to about Rs 3 crore an acre in this area. Even if we value the Sahara land at current market rate, it comes to around Rs 558 crore. It is unlikely to be Rs 1,436 crore by any stretch of imagination.
Sahara has used similar tactics with its other real estate assets.
Sahara’s reply to INN’s queries, emailed more than 10 days ago, is still awaited.
INN investigated only one of the Sahara properties, but similar ‘artificial’ increases in value can be seen across the board. Thirteen Sahara real estate companies own 707 acres of the Aamby Valley project in Pune and its development rights were sold off for Rs 3,459 crore to the same Sahara company, SIREC.
Clearly, there is more to it that meets the eye.
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