Where has Sahara's money gone?

Two years ago, Sahara chief Subrata Roy Sahara boasted in an affidavit filed in the Supreme Court about sufficient assets, which could be used to pay back a whopping Rs 24,000 crore to the investors in Sahara India Real Estate Corporation (SIREC) and Sahara Housing and Investment Corporation. Today, the truth seems to have come out with the counsels of the company admitting in the court that it is 'impossible' to pay Rs 10,000 crore.

Appearing for Roy, senior counsel Ram Jethmalani told the bench of Justices K S Radhakrishnan and J S Khehar that "the task to pay Rs 10,000 crore is virtually impossible". The Supreme Court on Wednesday said Roy could get bail as soon as he pays Rs 5,000 crore in cash to be deposited in court and balance in the form of bank guarantee with market regulator Sebi, as part payment of the amount due to the investors. The Sahara chief may have to remain in jail for at least another week because of his inability to pay. 

But why is it that the group's erstwhile rhetoric of having enough underlying assets to meet liabilities, has receded in the horizon. Where are the over Rs 30,000 crore worth assets, which Roy claimed can be deployed to meet any contingency his 2012 affidavit? 

The group's take is that monetisation of the assets, whose title deeds are with Securities and Exchange Board of India (Sebi), will fetch very little money as it will be distress sale. The argument however, has been given by the company earlier also in the court and has been rejected. "The title deeds of assets having value over Rs 20,000 crores are lying with Sebi only. If case by case Hon'ble Court allows to sell assets, it will be a distress sale which would not fetch more than 20-25% of the real value of the asset. Moreover, money from the sale of bigger assets will only come in long term installments in view of Indian financial strength," the company said.

"The precondition to the bail of such a large amount appears unusual and is not a surety for securing the presence but a mode of recovery," it added.

Interestingly, the nine jewels, or the key real estate projects listed in the 2012 affidavit. The nine jewels, includes the premium Sahara project in Aamby Valley (near Pune). It also includes an 186-acre plot in Gurgaon and New Delhi, 64 special pupose vehicles of Sahara having 64 housing projects in 64 cities. Taken together, all the projects have a combined valuation of about Rs 36,000 crore.

Apart from the distress sale logic reiterated by the company every time, what is it that is holding back the corporate house from monetising the assets to fetch bail for its top honcho. Is overvaluation of the properties the reason?

Assets purchased by Sahara have seen valuations zoom by about 23 times despite any development work undertaken on them. By 2007, twelve realty firms under the group had acquired 186 acres of land in phases in Gurgaon. Sahara shelled out about Rs 62 crore over a period of time. These were shown in the books at about rs 1,436 crore. Selling of development rights for a bloated sum could not be ruled out.