On Thursday, Sebi Chairperson Madhabi Puri Buch said the “Sahara matter will continue for the capital markets regulator even after the death of the group’s founder Subrata Roy”. Sebi had asked the Sahara group to deposit over Rs 25,781 crore with it — the money had allegedly been illegally raised. Sahara deposited Rs 15,506.81 crore. It is not clear what more Sebi can do other than making fresh demands, when it has refunded only Rs 138 crore (including interest of Rs 67.98 crore) in almost a decade. If no depositors are screaming for money, were there no real depositors worth talking about? Meanwhile, four cooperative entities of Sahara have raised almost Rs 87,000 crore in 10 years, starting 2010, and that remains in limbo! How was Sahara continuing to raise money? Doesn’t the Enforcement Directorate, which is responsible for money laundering and benami transactions, want to know?
At 30, Roy started his entrepreneurial journey at Gorakhpur, with Rs 2,000, as a peon and a clerk, and with his father’s Lambretta scooter. After several initial efforts that did not amount to much, Roy hit upon a small savings scheme, a para-banking venture, which would accept small deposits from rickshaw pullers, vegetable vendors, grocers, and tea stall owners, promising them an assured return. By 2008, Sahara India Financial Corp had become the country’s largest residuary non-banking company, with a deposit of Rs 20,000 crore.
In the 1990s, Sahara India Parivar, as he called his group, would progressively jump into every “hot” business segment that came across — real estate, media, cricket, airlines, tourism, hospitality, insurance, mutual funds, retailing, etc. At its peak, Sahara Parivar claimed a payroll strength of over 1.2 million workers, next only to the Indian Railways. Roy, like the seasoned politicians that he rubbed shoulders with, blended patriotism (his newspaper was called Rashtriya Sahara), patronage, pizzazz, and a patriarchal order, to build an empire that yielded strange paradoxes. The Sahara logo was emblazoned on the Indian cricket team; and a wide network of celebrities from Bollywood, sport, and politics helped to burnish Sahara’s credibility. As if pecking at a late afternoon snack, Sahara bought up prestigious global hotels like New York’s landmark Plaza and London’s Grosvenor House, and aimed for the landmark Taj Mansingh (managed by the Taj group for decades), when its long-term lease was ending. Full-page advertisements bombarded us from every newspaper in the country whenever Sahara felt wronged or it wanted to publicise some dubious schemes such as Sahara City or Sahara Q Shop. One advertisement called Sebi a “sarkari gunda” in the midst of a legal battle in the Supreme Court. In sharp contrast to its glitzy image and headline-making moves, Sahara’s finances were completely shadowy. Not one of his businesses went public, and so the source of its funds remains unclear even today.
Even though the group remained private, Sahara should have been under the close scrutiny of the Ministry of Finance and RBI, given the enormous resources it was supposedly raising from the public. Instead, Sahara continued to grow and obtain the mutual fund and insurance licences without close inquiry. Troubles started accidentally for the group when it made a crucial blunder. Two Sahara group companies — Sahara India Real Estate Corporation and Sahara Housing Investment Corporation — raised money through optionally fully convertible debentures (OFCDs) without seeking Sebi clearance. Sahara did not plan to list these debentures on the bourses as required. So it started an investigation and asked the companies to refund the money. A landmark Supreme Court judgment in 2012 upheld Sebi’s stand and asked the money to be deposited with the regulator. Sahara was reluctant and when Roy failed to appear before the court in contempt proceedings, he was arrested and jailed from March 2014 to May 2016. He was released on parole for the last rites of his mother and never went back.
What happened simultaneously was stunning. Sahara had launched a pan-Indian money collection drive through four cooperative societies: Sahara Credit Cooperative, Saharayn Universal, Humara India, and Stars Multipurpose Cooperative. Over 10 years, starting from 2010, completely unaffected by Roy’s imprisonment and regulatory action, it collected an additional Rs 87,000 crore from 60-70 million people. Nobody knows where the money was invested and if it earned any returns, but by 2019 end, Sahara had begun to default on repayments and thousands of complaints were filed with the central registrar of cooperatives. Vivek Aggarwal, joint secretary, cooperatives, and central registrar, asked for SFIO investigation, which made little progress. Less than a year ago, the apex court suddenly ordered Sebi to part with Rs 5,000 crore (out of over Rs 25,000 crore) to be distributed pro rata among Sahara’s agitating depositors. No one seems interested in getting to the truth of Sahara’s Rs 87,000 crore collection, verifying the investors, checking what happened to the money, or making any attempt to refund it. Sebi continues to sit on over Rs 25,000 crore plus interest. Once again, we will know the truth about the ownership of this money (over Rs 1 trillion) only on a serious inter-departmental probe possibly led by the RBI and SFIO.
The writer is editor of www.moneylife.in and a trustee of the Moneylife Foundation; @Moneylifers
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