This group is a strange entity—high profile and shadowy
Sahara India Financial Corporation’s (SIFC) front-page ad about its plan to prepay a huge Rs73,000 crore, four years before a Reserve Bank of India (RBI) mandated wind-up, had financial intermediaries sniggering and regulators red-faced. As a pink paper said, Rs73,000 crore amounts to 1% of India’s GDP (gross domestic product). If the group could generate that kind of cash, why was it in a hysterical war and litigation with SEBI (the Securities and Exchange Board of India)—involving many newspaper advertisements criticising SEBI—after it was asked to refund just over Rs6,500 crore raised through hybrid debentures in unlisted entities—Sahara India Real Estate Corporation and Sahara Housing Investment Corporation?
Now, Sahara is a strange conglomerate—both high-profile and shadowy. It seems to have endless funds to spend on expensive indulgences like building a brand new hill station, sponsoring the Indian cricket team, buying the Pune IPL franchise far away from its Lucknow headquarters or snapping up the famous Grosvenor Hotel in London. At the same time, group finances are extremely complex, they cover a clutch of listed & unlisted entities and the source of their enormous revenues and profits are hard to decipher. Sahara has long been under close regulatory scrutiny; yet, its audacious announcement is opaque and unclear on detail. For instance, in 2008, SIFC, a residual non-banking finance company, apparently had Rs20,000 crore in deposits, which were to be wound up by June 2015. So what is the composition of this Rs73,000 crore, especially when the RBI order had asked it to gradually bring down aggregate liabilities to Rs15,000 crore by June 2009 and Rs9,000 crore by June 2011? More importantly, where will the money come from? The group’s total finances and profitability have always been a mystery. According to sources, the Sahara group has got permission to set up a multi-state cooperative and could simply transfer deposits from SIFC to that entity. It is not clear if this will happen; the company certainly has not said so.
Interestingly, Sahara’s enormous depositor base is also strangely unperturbed by any regulatory action against group entities. At the time of going to press, the RBI had no answers. However, the fact that a financial conglomerate can issue such a preposterous advertisement (there is no logo; nor does it identify any signatory by name) with no intimation to the RBI only shows the regulatory system in very poor light.