With its Chief cooling his heels Tihar Jail and Supreme Court tightening its screws on group companies to repay 20,000 odd crore rupees collected from the investors, for Sahara group it has become a battle for survival. With uncertainty looming over its very existence, execution and operation of some of its ambitious projects have become a subject of debate. Recent rating downgrade of one of the group companies by the rating agency will only compound the problems of the Sahara group and also enhance the cost of borrowing for the group. We analyze four major projects undertaken by the group and its future prospects:
Sahara City Homes project
The flagship project of Sahara Prime City Limited is ‘Sahara City Homes’, a chain of townships proposed to be developed across 217 cities in India in a phased manner. Most of these projects are lined up in tier II and tier III cities. Though the project was launched in 2007, possession was given to customers only in Lucknow, Nagpur and Indore. In rest of the cases, the project has not been able to meet the deadline. Those who have paid advances are still in an unending pursuit of dream homes. Recent happenings involving Sahara group may prevent their dream becoming a reality. Recent downturn in realty sector has only aggravated the situation for Sahara group.
Sahara hospitality project
Sahara hospitality project involved construction of Sahara Star Hotel in three phases. Phase-I of the project was completed in October 2007 wherein 223 rooms and 9 specialty restaurant outlets were constructed. Phase II and III include construction of 209 rooms (186 rooms in phase-II and remaining in phase-III) and other facilities. The project is planned to be completed by July 2014 as compared to the previous plan to complete the project by March 2014. As on December 31, 2013, SHL had incurred a total cost of Rs.840.97 crore towards Phase II and Phase III of the project funded by term loan from banks of Rs.399.37 crore and the balance Rs.441.60 is infused by the group companies. “The ability of Sahara Hospitality Limited to timely execute the expansion project as per the revised schedule and improve capacity utilisation are the key rating sensitivities,” CARE Ratings said in its recent report. Though the project is nearing completion after substantial time overrun, pathetic condition of hospitality sector may prolong the pay back period of the project.
Titlagarh supercritical thermal power project
Titlagarh supercritical thermal power project is the major diversification project of Sahara group which marked the entry of Para-banking magnate into infrastructure sector. The project entailing an investment of Rs. 5,604 crore involved setting up of 1,320 MW (2×660) super critical coal based power unit at Titlagarh in Bolangir district of Orissa. A Memorandum of Understanding was entered into with the government of Orissa for this purpose five year ago in February 2009 and the project was to be completed within 60 months from the date of signing of MoU. However, till date, neither the land acquisition has been completed nor the company was able to achieve financial closure for the project. In June 2013, the company had invited tenders for setting up the project on EPC basis.
Dhenkanal solar photovoltaic power project
In 2008, Sahara group too joined the ever growing list of players entering solar power generation. A group company, Sahara India Power Corporation, announced its plans to set up a solar photovoltaic power unit with a capacity of 5 MW in Dhenkanal district of Orissa. Orissa government had given ‘in-principle’ approval for the project in December 2008. However, nothing much has moved since then. Initially it was told that, issues relating to land acquisition are delaying the project. Last year, the company officials told that the company was still awaiting for state government approvals for the project. Since then nothing has been heard about the project.
