Will Sebi, which yesterday attached the bank accounts of two Sahara Group firms, find much money in them?
Unlikely. On 4 January 2012, two Sahara group companies - Sahara India Real Estate Corporation (SIREC) and Sahara Housing Investment Corporation (SHIC) - reported to the Supreme Court that they had Rs 1,655 crore in cash and fixed deposits and Rs 23 crore in mutual funds, apart from stakes in several real estate projects.
How then did they repay the bulk of the Rs 24,000-and-odd crore they owed nearly three crore investors in their optionally full convertible debentures (OFCDs)?
The Supreme Court, in its judgment of 31 August 2012, had categorically directed Sahara to hand over Rs 24,000 crore, plus 15 percent interest, to Sebi and it is Sebi which was to disburse the amount to amount to 2.96 crore investors after Sahara furnished the list and addresses of investors.
Two months later, on 9 December, Sahara claimed through a newspaper advertisement that it had cleared the liability and now owed investors only Rs 2,620 crore.
Most of the investors had invested money in two of the three OFCDs - Adobe and Real Estate - offered by the Sahara companies. The refunds in Adobe bond were due from 2018-19 onwards, while the refunds in Real Estate bonds were due 2013-2014 onwards. But Sahara claimed to have made premature refunds arbitrarily without the knowledge of the court!
Without going into legalities and the criminality of the claims made by Sahara, one of the Sahara's own affidavits is enough to demolish its side of the story.
The affidavit, received on 4 January 2012 by the Supreme Court, disclosed that its bank accounts had Rs 1,655 crore (including fixed deposits and other current receivables as on 30 November 2011). And it had Rs 23 crore in mutual funds.
To prove that it could repay investors in SIREC and SHIC, Sahara listed countless properties in which it had direct or indirect stakes. It stated that these assets, worth Rs 56,318 crore in terms of market value, were "sufficient security for repayment and to meet the liabilities." Besides, the affidavit said, the shareholders of Sahara group had invested Rs 2,320 crore till June 2011. This showed the shareholders' commitment and thus Sahara's strength to meet the liabilities.
In the same affidavit, De & Bose, chartered accountants for Sahara, had evaluated the total value of SIREC's fixed assets at Rs 5.01 crore (5,00,97,513). The fixed assets included immovable (freehold land) and moveable assets, including vehicles, office equipment, furniture, etc.
This are the only tangible assets listed!
The rest are assets whose value can only be realised on sale. These were some of the assets listed: Development rights in 707 acres of land owned by Aamby Valley Ltd, development rights in 186 acres of prime land in and around Delhi and Gurgaon, 33 percent stake in a Versova project comprising 106 acres of land, 90 to 95 percent stake in 64 special purpose vehicles (SPV) of Sahara Group, 40 percent stake in four city home projects in four cities, 50 percent stake in 15 city home projects in 15 cities/towns, 30 percent stakes in projects at village Ujariyaon and Jiyamau in Lucknow, 100 percent stakes in 60 entities having 515 acres of land at 16 locations, 100 percent stakes in two entities having 196 acres and 56 acres of land at Vasai and Malegaon, Maharashtra.
Sahara appears to still have the same stakes in these projects. It hasn't apparently divested them. So how did it raise Rs 24,000-and-odd crore to pay back its investors!
Did SIREC and SHIC raise that kind of money through sales and other income? They are yet to submit their current balance-sheets. But if their 2011 balance-sheet is any guide, Sahara could not have reached anywhere near this huge sum of money!
According to SIREC, its income was Rs 839 crore through the sales of products, interest, etc, made between 1 July 2010 and 30 June 2011. And its expenses were Rs 822 crore. Thus the net profit was around Rs 103 crore after excluding taxes and other expenses.
Between 4 January 2012, when Sahara submitted this affidavit, and 9 December 2012, when Sahara came out with the advertisement, Sahara could have repaid the money only through loans. But there is nothing to suggest that the group had raised huge amounts as loans during this period.
So how did it redeem the investments of nearly three crore investors?