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Corporate Dec 10, 2012

Sahara’s numbers don’t add up: ads confuse, don’t clarify

By Vivek Kaul and R Jagannathan

The Sahara group sure has a way with numbers. A separate number for separate occasions.

On 1 December this year, an advertisement issued by the group said two of its companies - Sahara India Real Estate Corporation (SIREC) and Sahara Housing Investment Corporation (SHIC), which fell foul of Sebi - had returned Rs 33,000 crore of money collected through optionally full convertible debentures (OFCDs).

The ad read: "We started OFCD in these two companies in 2008/2009. Most of the money deposited with us was for 5 to 10 years. But now we have cleared around Rs 33,000 crores liability."

On 5 December, a Supreme Court bench headed by Chief Justice of India Altamas Kabir extended the deadline for repayment till February. It ordered Sahara to pay Rs 5,120 crore immediately to Sebi, Rs 10,000 crore by January, and the rest by February. This suggests that the court still thinks nearly Rs 25,000 crore may be owed to investors.

A Sahara ad released on 9 December claimed it owed investors only Rs 2,620 crore as on date. It mentions that "Total liability was around Rs 25,000 crores of both the OFCD companies" (Note: since there are no dates, nothing can be verified), but then says only Rs 2,620 crore of this Rs 25,000 crore was left unpaid, for which it had given Sebi a cheque - adding an extra Rs 2,500 crore in case there were any discrepancies.

Sahara has a lot of explaining to do. The group, whose attitude has been described as "shaky" by the Supreme Court, is not telling us the real story.

The Supreme Court judgment of 31 August 2012 takes note of an outstanding of Rs 24,029.73 crore as on 31 August 2011 between the two companies that was owed to 29.61 million OFCD investors. (Read the full judgment here)

One wonders at what point did Sahara managed to pay investors Rs 33,000 crore when the figure was only around Rs 24,029 crore in August 2011?

The only way the group could have repaid Rs 33,000 crore over the lifecycle of the OFCD investment was if there was a huge churn even in the initial years of the scheme in 2008-11. Sebi banned them from continuing the scheme in June 2011.

Sahara offered investors three types of bonds through SIREC - the Abode 10-year bond, where early redemptions were possible only after five years; the Real Estate bonds of five years, where no early redemptions were possible; and the Nirmaan four-year bond, where redemptions were possible after 18 months.

The bulk of the investors opted for the first two bonds - Abode and Real Estate, where no redemptions were possible for five years. Since the SIREC OFCDs were issued only from 2008 (SHIC began only towards end-2009), how is it possible that such a large bulk of OFCDs were refunded to investors when they were not due?

As Firstpost noted earlier, a majority of SIREC's investors (13.036 million) preferred to invest in Real Estate bonds worth Rs 7,120 crore. And Abode bonds came in for second preference, as 7.06 million invested in them, but the amount invested was larger at Rs 8,411 crore. Nirmaan bonds had a small following of 13.06 lakh investors with an investment of Rs 1,959 crore.

The big question is this: how can Sahara claim that it repaid nine-tenths of the money collected (only Rs 2,620 crore left out of Rs 25,000 crore or more) when the two biggest OFCDs issued by SIREC did not have any clause for premature encashment before five years - which meant only in 2013 and not earlier?

There was, of course, a provision for premature refunds in case of deaths, but Sahara is not claiming that most of its investors had passed away during the term of the OFCDs.

The refund patterns disclosed in the Supreme Court's judgment tell their own story.

Of the total amount of Rs 19,400.87 crore collected by SIREC till 13 April 2011, only 11.78 lakh investors out of 23.3 million had cashed out with Rs 1,744.34 crore by 31 August 2011 - leaving a balance of Rs 17,656.53 crore.

In the case of SHIC, premature redemptions were a meagre Rs 7.3 crore (involving just 5,306 investors) out of total collections of Rs 6,380.50 crore - leaving a balance of Rs 6,373.20 crore.

These numbers are a part of the disclosures made by Sahara to the Securities Appellate Tribunal, which heard and threw out its appeal against Sebi, as on 31 August 2011, and remained part of the Supreme Court order a year later.

The questions are clear:

Why did Sahara not tell the Supreme Court what it owed investors during the hearings on the case? How come the Rs 2,620 crore figure came up only when the Supreme Court ordered it to pay Rs 24,029 crore?

How did Sahara manage to refund most of the money when the bulk of the bonds were not meant to be prematurely redeemed till 2013? How did dues of Rs 24,029 crore become Rs 2,160 crore, or even Rs 5,120 crore?

Did Sahara really refund the money or shift it to different schemes? Or why else would Sebi issue ads warning investors to avoid Sahara approaches? Business Standard clearly reports that investors under pressure are moving their money.

The newspaper reported that agents of the Sahara group were being pushed to collect sehmat patras (consent letters) from investors to show that their money had already been returned to them. "Agents, estimated to be a million strong, who sold OFCDs, often termed housing bonds, have been ordered to collect these letters, failing which their commissions are being stopped. With these consent letters, many of which are pre-dated, with dates ranging from as early as April to show that refunds were spread over a long period, documents such as account statements and passbooks in the hands of the customers are being collected," the newspaper reported.

Also, money was being transferred to the new Q Shop venture launched by the group. The newspaper adds: "While this documentation process has been on, a significant portion of the money deposited in the accounts have already been transferred to the Q-Shop plan, another money raising plan being marketed as a retail venture."

Sahara has a lot of explaining to do. The group, whose attitude has been described as "shaky" by the Supreme Court, is not telling us the real story.


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