Sahara trying for more transparent image with realty IPO
Mumbai: Sahara Group is hoping for an image makeover with it’s forthcoming IPO. In a statement to the media, Sushanto Roy aimed at making a clearer and more appealing picture of the industrial giant stressing that the effort will hopefully help change public perceptions about the group.
Sushanto Roy is the eldest son of group chairman Subrata Roy.
“The Sahara Group is seen as a business house that is non-transparent. We are seen to be too closely held. It’s time we showed to people that we have nothing to hide,” Mr Roy, who also heads the real estate and infrastructure business, told ET in an interview.
In the future, the real estate business will be the group’s flagship as its current mainstay, an activity commonly referred to as parabanking, is in the process of being wound down. Sahara India Financial Corporation, the group’s flagship, accepts fixed deposits from the public and invests the money in government bonds and other approved securities.
But the Reserve Bank of India (RBI) has instructed the group to stop accepting any new deposits which matures beyond June 30, 2011. The RBI has also asked Sahara not to accept instalments of existing deposit accounts from that date. This would increase the importance of the real estate business. “We know that the listing of our real estate company will open us up to public scrutiny. This is a conscious decision and we are confident that this will take care of the perception issues,” he added.
Subrata Roy built the financial services to real estate business virtually from scratch, beginning his journey in 1978 in UP with a small deposit-taking venture. While his hard work and networking helped him build a $12-billion group with interests in a variety of sectors, it also helped generate suspicion about the group’s practices such as alleged lack of transparency and perceptions that it was close to politicians. The group’s struggling aviation business had to be sold off to Jet Airways in a transaction which generated acrimony and mistrust between the two.
Matters are a lot better now and Sushanto Roy says the group is working to improve its perception and public image. “Perception essentially relates
to performance. And when you perform, perception about you only gets better. But at the same time, it’s important that the performance shows up. So, we needed a publicly listed company to show our performance. And I am sure our performance will change the perception about the group,” he added.
Sushanto made it clear that this endeavour is being spearheaded by him and his brothers, Seemanta — who looks after Amby Valley and Sahara One — but was conceived by his father Subrata. The group has been accumulating land for the past six years. It now has a land bank of 8,500 acres in 99 cities. Unlike DLF and Unitech, who are concentrating on tier I and tier II cities, Sahara Prime City, the real estate arm, is targeting tier II and tier III cities and towns. “We see a great potential in the smaller cities and towns where there are no organised players. And we have the first mover advantage. Being the first one to tap the small cities, our average cost of land is Rs 48 per sq feet against that of our peers of Rs 300-400 sq feet in big cities,” he says.
With a debt-equity ratio of 0.16, Sushanto says SPCL has the flexibility to raise big money as and when the need arises. The company has filed a prospectus with Sebi and intends to raise around Rs 3,450 crore from the primary market. The issue is expected to hit the market in first quarter of next year.
He is quick to emphasise that the real estate investments will not lead the group to dilute its focus on the finance business though the nature of that business will change because of the regulatory clampdown on the traditional parabanking business. “We won't give away the strength of our parabanking network. We will instead utilise this network of 1,700 branches to aggressively push our insurance and mutual fund business. This is a systematic transition that we are working towards,” Mr Roy said.
“We have never faltered in our repayments in the past 30 years. And we won't in the coming days either. But one mantra that will remain intact is our focus on volumes. Be it insurance, mutual funds or our real estate business, our strategy will hinge on high volumes.”
When his father fell ill in 2005, Sushanto had said his father was “disciplining his lifestyle”. Did it bear results? “Oh, yes! We played 5 sets of badminton this evening,” Sushanto told ET on Friday evening. Now Sushanto is trying to “discipline” the group's less than stellar corporate image. The question is whether he will he succeed or not.