Two Sahara group firms have invested a significant portion of the money raised through the issue of Optionally Fully Convertible Debentures (OFCD) in Aamby Valley, a luxury township project developed by the group in Maharashtra.
Sahara India Real Estate Corp (SIRECL) and Sahara Housing Invest Corp (SHICL) had a combined exposure of Rs 6,687 crore to the township project at the end of June 2010. This amounted to over a third of the sum raised through issue of OFCDs. On that date, these firms had raised Rs 16,169 crore between them by issue of OFCDs. SIRECL had dues of Rs 13,245 crore, including accrued interest of Rs 1,287 crore towards investors in OFCDs. SHICL had one of Rs 2,924 crore. Accrued interest was Rs 107 crore.
|COST OF LUXURY
Investments in Aamby Valley
|Company||Number (in million)||Book value (Rs cr)||Price per share (Rs)|
|Source: Annual reports|
In February 2010, media reports had talked of the Sahara group buying back a 49 per cent stake in Aamby Valley pledged with C Sivasankaran of the Sterling group. Business Standard could not independently confirm if the above investment by the two real estate firms resulted in an exit for Sivasankaran. An email questionnaire to the Sahara group spokesperson on Tuesday did not elicit any response.
SIRECL and SHICL have disclosed these investments in their annual reports for the year ended June 2010. Kolkata-based De & Bose were the statutory auditors of both. The companies recently filed the balance sheet and annual report with the registrar of companies. Business Standard accessed these filings from the website of the ministry of corporate affairs, which allows public viewing of these documents for a fee.
The Supreme Court, which is hearing the companies’ dispute with the market regulator over the legality of these debenture issues, had directed them to update their financials before proceeding with the hearing. The two firms are yet to file the audited financials for the year ended June 2011.
According to the financials for FY10, SIRECL had invested Rs 5,328 crore in 234 million equity shares of Aamby Valley as on June 30, 2010. It also had investments of Rs 512 crore in debt mutual funds and shareholdings in 70 subsidiaries. These investments were among the largest items on the balance sheet.
Under current assets, SIRECL had inventories worth Rs 7,847 crore and a cash/bank balance of Rs 1,393 crore. Loans and advances totalled Rs 1,470 crore. Of these, trade advances amounting to Rs 1,351 crore were given to subsidiaries. Ten subsidiaries, which were added to the subsidiaries’ list during the financial year, alone accounted for advances of Rs 1,300 crore.
These included Sahara Prime Realtors, Sahara Oceania Homes, Sahara Continental Estate, Sahara Prime Properties, Sahara City Development, Sahara Green Properties, Sahara New Dream Property, Sahara Milestones Estates, Sahara Oceania Property and Sahara Prime Dream Development. In addition to the money raised through debentures, the company made a preferential allotment of 90 million equity shares, raising Rs 90 crore.
Similarly, SHICL has an investment of Rs 553 crore in 19 million Aamby Valley shares. In addition to this equity investment, SHICL also held 800 convertible debentures of Aamby Valley worth Rs 806 crore. These debentures carried a coupon of nine per cent. SHICL also held four million preference shares worth Rs 204 crore in another group firm, Sahara Infrastructure and Housing Ltd. The promoters of SHICL infused Rs 882 crore through preferential allotment of equity shares.
For FY10, SHICL reported a net profit of Rs 169 crore. SIRECL reported a loss of Rs 68 crore.
SIRECL and SHICL are locked in a protracted legal battle with the Securities and Exchange Board of India (Sebi). In early 2010, Sebi, during the course of examining the prospectus of another group firm, Sahara Prime City, had discovered alleged irregularities in the issue of OFCDs by SIRECL and SHICL. According to Sebi, these issues violated public issue norms. In November 2010, the regulator banned the money-raising activity, triggering a long legal battle that has spanned courts and tribunals in Lucknow, Mumbai and Delhi.
The Sahara group contends the OFCDs were issued on a private placement basis. “During the period under review, certain information (on the basis of some alleged complaints received by Sebi, which despite repeated request have not been shared with the company), were called for by Sebi in the matter relating to the issuance of Optionally
Fully Convertible Debentures by the company on a private placement basis,” the SIRECL annual report said. “Sebi, after issuing summons to the company but without providing opportunity for hearing or waiting for clarifications from the Union of India through the ministry of corporate affairs, passed an ex parte order dated November 24, 2010 and posted the same on its website,” SIRECL said. The board of directors “are of the firm view that the company has not violated any provisions of the Companies Act, 1956, or any guidelines/ regulations issued under the Sebi Act, 1992.”