4,700 acres across 14 states: Why mega Sahara sale will be next to impossible
Not many investors would want to risk his money by owning a piece of Sahara’s legacy
Market regulator Securities and Exchange Board of India (Sebi) has initiated the process of selling Sahara's real estate parcels spread across the country.
A report in The Times of India today (30 May) says that Sebi has given the mandate to sell about 4,700 acres of Sahara land parcels to HDFC Realty and SBI Capital Markets.
The land is spread across 14 states and includes 60 properties. The regulator is eyeing Rs 6,500 crore from the sale, says the report. The Sebi's move is in keeping with the Supreme Court's directive to Sebi on 29 March to initiate the process of selling 87 "unencumbered" properties of the Sahara group.
The proceeds will be used to generate the bail amount (Rs 5,000 crore bail amount and another Rs 5,000 crore bank guarantee) for Subrata Roy who was given a four-week parole on 9 May for his mother's death. According to the ToI report, Sahara has a total of 33,633 acres across the country, of which Amby Valley is 10,600 acres and 1,000 acres are spread across Uttar Pradesh.
There are reasons to believe that Sebi’s task is likely to end up as largely a failed affair, not very different from what one has seen from banks efforts to sell Kingfisher owner, Vijay Mallya’s assets to recover their dues. The moot question is this: Will the auctioneers - HDFC Realty and SBI Capital Markets - be able to easily sell the land and get the targeted amount?
One needs to factor in various aspects to arrive at an answer.
For one, most of these assets are entangled in a web of litigation. Over the last few years, Sahara has become synonymous with financial fraud and duping of investors. Whoever wants to buy its properties will have to think not twice or thrice, but a hundred times over. That's why despite the group's desperate attempts to sell various properties, it has been only able to sell about 550 acres and raise about Rs 2,733 crore (Mint report) over the last two years.
Interestingly, this is where the Sahara saga strikes a common chord with Vijay Mallya's Kingfisher House, although both cases are in an entirely different context. Lenders, who are stuck with Rs 9,000 crore worth dues from the billionaire's Kingfisher Airlines, have been trying to sell the headquarters of the defunct airline for the last few months but have failed to get any bids. The building has a built-up area of over 17,000 sq ft and is located in the plush Vile Parle area near the domestic airport in Mumbai.
The auction conducted on 17 March was a flop as no bidders came forward, citing high reserve price which was set at Rs 150 crore. The building is stuck with the lenders from February 2015 when they managed to wrest control over the property after a long court battle under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act. Now desperate, banks are planning to revalue the property.
Sahara's properties now on the block are also most likely to meet the same fate. While Kingfiser House is in Mumbai city, the land parcels of Sahara are in the rural areas and are agricultural land (ToI report). This will only make the sale all the more difficult. Selling its overseas assets - Grosvenor House in London Sahara and The Plaza, and the Dream Hotel Downtown - have been a lengthy painful task for the group. It is after two years of negotiations, that the group told the court in March that it has sold Grosvenor House to Qatar. (Sahara also told court that it is in talks to refinance its loans on its other two New York hotels.)
Another factor that needs to be considered is the slow down in the real estate sector. The Modi government's black money hunt and general weakness in the economy have hampered real estate deals, which were easy avenues to park black money before. Selling land in such a scenario is not going to be easy.
Also, builders are vary that once the Real Estate Bill, with distinctive clauses to protect consumers, becomes operational in the near future, land entangled legal cases will only make their businesses difficult. They wouldn't want to buy such land.
Morever, Sebi cannot sell the property at huge discounts. This is because while asking it to sell off 87 properties the SC bench, also comprising Justice AR Dave and Justice AK Sikri, said the regulator will have to take its prior nod before going ahead with the sale of any property if it (Sebi) receives bids even below 90 percent of the circle rate. "You (Sebi) evolve mechanism and start selling the properties and we are passing the order to this effect," the bench said when the counsel for Sebi alleged that nothing concrete was happening on the ground.
Raising Rs 6,500 crore by selling 4,700 acres seems to be a tall task for Sebi and its auctioneers. In other words, not many investors would want to risk their money by owning a piece of Sahara’s legacy.