Sahara-Mirach Loan Deal: Issues and Possible Implications

Sahara-Mirach loan deal

Sahara-Mirach loan dealSubrata Roy’s Expensive Bail


The Sahara India Pariwar or the Sahara Group was one of the most revered conglomerates in the country till about 2011. In March 2011, the group had a market capitalization of about USD 25.9 billion. The trouble started when the Securities and Exchange Board of India (SEBI) discovered that the group had sold bonds worth billions of dollars to its investors. By March 2014, the issue had escalated to the country’s Supreme Court, which ordered the company’s Chairman Mr. Subrata Roy to be imprisoned for contempt of court. The Supreme Court had asked the group to refund investors’ money and the group claims that the refund had been processed. SEBI declined the veracity of this claim and Mr. Roy failed to appear in court. His bail amount was set to USD 1.6 billion. Since then, Sahara has been trying to raise this money by refinancing some of its key properties.


Sahara-Mirach Deal


By early January, it was reported that the Sahara Group was in the final stages of negotiating a financial agreement with the Mirach Capital Group from the US to raise the bail amount for Mr. Roy using the group’s three hotels in New York and London as collateral (including the Plaza and the Dream Downtown Hotel in New York and Grosvenor House in London). It was agreed that Mirach would lend the Sahara Group USD 1.55 billion (approximately INR 9,400 crore) of which about USD 882 million (about INR 5,468 crore) would go towards repaying Sahara’s debt to the Bank of China and the rest would be given as a loan to Sahara. It was widely understood that this amount would go towards payment of Mr. Roy’s bail. Sahara could take a year to repay the loan and would pay an interest of about 11 percent.


The Founder & Chief Executive of Mirach, Saransh Sharma also agreed to meet the SEBI’s amicus curiae (an impartial adviser to a court of law) to understand the gravity of the situation and assure them of the authenticity of Mirach’s intentions to go through with the deal. He also attended the Supreme Court hearing on 9 January along with other Sahara personnel in a show of solidarity.


Forgery Investigation


Amidst allegations that Mirach Capital Group forged the letter given to Sahara with regard to the financing deal, United States federal authorities have decided to investigate the US based group. The letter given by Mirach is believed to be part of the documents provided to Sahara as proof that the capital funder possessed the requisite funds in the Bank of America account to go ahead with the deal. The letter was also produced before the Supreme Court of India by the Sahara Group. Soon after the details of the deal were announced, some news reports raised serious doubts about the authenticity of the document. Sahara, too, looked into the document and claimed that it was a case of forgery. The company also announced that the matter would be pursued legally and that Mirach would face legal action – both criminal and civil – in India and in the US.


The Federal Bureau of Investigation’s San Francisco office is in charge of interrogating Saransh Sharma in this regard. As of February, however, FBI spokespersons did not confirm undertaking such a probe. The Bank of America is also withholding comment in the matter. Mr. Sharma’s representatives have, however, denied being under the scanner and suggested that it could be a rumour purported to hamper the Mirach Group’s financial interests.


More Questions


Apart from the forgery issue, a number of other questions and suspicious circumstances have also come to light that cast a shadow on the deal. Very little is known about Mirach Capital Group LLC and its principal investors. CEO Saransh Sharma is believed to have grown up in Muscat (Oman) and moved to the US when he was 17. Rap artist, Pras Michel, and a sports agent from New York, David Sugarman, somehow seem to be involved with the group, but their capacities are not clear yet. Mr. Sharma has been quoted by news reports saying that the group is backed by wealthy American and British families who do not wish to make themselves known till the deal comes through.


Mirach Capital itself has raised many eyebrows in the market. The company does not seem to have proper offices to operate out of. It was registered in Florida (United States) as a company as late as 1 December, 2014. Given the suspicious circumstances of the group’s inception and administration, the huge amount of money involved, Sahara’s high stakes, and the alleged forgery, it seems highly unlikely that the dubious deal will come through.


Possible Implications of the Fallout


The immediate consequence of the fallout of the deal is that Mr. Roy will still be required to stay in Tihar till the finances required for his bail are arranged. It is likely that Sahara may go back to others who have evinced interest in its properties. Unconfirmed reports suggest that the Sultan of Brunei may be interested in one of the New York Properties. It is also likely that the Saudi Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud who has a stake in The NY Plaza may buy out the rest and take over completely. Another Maharashtra based company has shown interest in Grosvenor House in London. Sahara will also need to find investors interested in Sahara Star and Aamby Valley.


In the larger picture, market watchers are concerned about the impact of the issue on Indo-US relations, especially at a time when PM Modi has India all geared to improve trade and economic ties with the US.