Mumbai: Market regulator Securities and Exchange Board of India (Sebi) is looking into a housing bond issue by a Sahara Group company, as part of its examination of the offer document for an initial share sale by Sahara Prime City Ltd, two people familiar with the development said.
The bonds, issued by Sahara Housing Investment Corp. Ltd in units of Rs1,000, offer up to 600% returns over a 15-year period.
“The (bond) issue is not by Sahara Prime City. Sebi is looking into a complaint on housing bonds issue in a related company,” one of the two persons, an investment banker involved in the initial public offering (IPO) by Sahara Prime City, said on condition of anonymity.
Sahara Housing Investment was until recently known as Sahara India Trustee Co. Ltd (SITCL). According to the IPO draft of Sahara Prime City, filed with Sebi on 29 September, the principal business of SITCL is “undertaking trusteeship”.
The documents filed with the Registrar of Companies (RoC) and reviewed by Mint reveal that SITCL, incorporated in 2004 to engage in “trusteeship activities”, got shareholders’ approval about two weeks before the IPO offer filing, to alter the memorandum of association to venture into new businesses such as “real estate, plots, residential buildings, houses/apartments and commercial office space at different project sites”.
All these business activities are similar to Sahara Prime City’s business objectives.
On 5 October, SITCL was renamed Sahara Housing Investment Corp. and started to issue the housing bonds that Sebi is looking into.
Usha Narayanan, executive director, Sebi, declined to comment. “I cannot comment anything on individual issues,” said Narayanan, who heads Sebi’s corporate finance division.
“The bond is an optionally convertible bond. The company is not a housing finance company and is not required to be registered with NHB (National Housing Bank),” Sahara Group’s corporate communications head Abhijet Sarckar said in an email response to Mint queries.
“There is no targeted/planned collection amount through the issue of these bonds,” the email said. “The company invests in the business of realty and infrastructure and related activities. This is a group company and has no direct link with Sahara Prime City Ltd.”
According to the application forms for the 180-month bond issue, investors are promised a maturity value of Rs31,500 for a minimum investment of Rs5,000, a 600% returns in absolute terms.
Investors who want to redeem the bonds before maturity are promised handsome returns as well.
The document promises a “premature redemption” value of Rs16,000, or just over three times the investment, if the investor chooses to exit after 120 months. The bondholder is also eligible for a secured loan of 50% of the principal after a year, 75% after two years and 100% after five years.
“Such loan will be available within 15 days of an application. The loan will attract an interest of 1.4% per month,” the document says.
According to its latest income statement, the company posted a profit of Rs79,883 only for the year ended March 2009. Its total income was Rs95,479.
The firm had an authorized capital of Rs100 crore. But according to another filing with RoC, the firm plans to undertake housing, township and infrastructure projects that will cost Rs20,000 crore.
The primary shareholders in Sahara Housing Corp. are Sahara Group managing worker and chairman Subroto Roy Sahara, his wife Swapna Roy and J.B. Roy. The three of them collectively hold around 60% and Kumar Pandey “for and on behalf of Sahara India Financial Corp. Ltd holds 40%”.
Sahara India Financial Corp. has over a period of time evolved into Sahara Prime City Ltd, primarily through a series of changes in nomenclature.
According to Sahara Prime City’s offer document, “Sahara Prime City was originally incorporated as Sahara India Financial Corp. on March 9, 1993, as a public limited company… The name of the company was changed to Sahara India Corp. Ltd, pursuant to a special resolution dated October 10, 1994… The name of the company was further changed to Sahara India Investment Corp. Ltd pursuant to a special resolution dated August 2, 2005… Subsequently, the name of the company was changed to Sahara Prime City Ltd pursuant to a special resolution dated February 11 2008.”
Enam Securities Pvt. Ltd, JM Financial Consultants Pvt. Ltd, IDBI Capital Market Services Ltd, Edelweiss Capital Ltd and Daiwa Securities SMBC India Pvt. Ltd are the book running lead managers for the Sahara Prime City issue, which plans to raise around Rs3,000 crore.