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Sahara chief Subrata Roy’s sons, Sushanto and Seemanto, resigned from the board of Sahara India Real Estate Corp Ltd (SIRECL) days before the company issued its prospectus for the bonds that landed their father in jail.
A Business Standard investigation of the red-herring prospectus filed by SIRECL with the registrar of companies for issue of optionally fully-convertible debentures (OFCDs) reveals Sushanto Roy, the elder son, resigned from the company’s board with effect from February 29, 2008. Seemanto Roy resigned 10 days later (on March 10). Both cited personal reasons. Soodip Neogi, another SIRECL director, also resigned on March 10.
The company’s prospectus, filed on March 13 after its board passed a resolution on March 10 to issue OFCDs in “implementation of the resolution of the shareholders in the extraordinary general meeting” of March 3, was signed by three directors — Vandana Bhargava (spelt Bharrgava), Ravi Shankar Dubey and Ashok Roy Choudhary.
While Dubey and Choudhary have been sent to Delhi’s Tihar jail along with Subrata Roy by the Supreme Court, Bhargava, though free, has been directed to coordinate with others for an early repayment of the debenture money to the Securities and Exchange Board of India.
The current directors were relative newcomers to the SIRECL board when the issue was launched. Choudhary joined on February 29, 2008, while Dubey and Bhargava a month earlier on January 28. Subrata Roy himself is not a member of the SIRECL board, and the prospectus describes him as the company’s promoter. “Sahara India Real Estate Corporation is a limited company promoted by Shri Subrata Roy Sahara. Shri Subrata Roy Sahara is founder of the Sahara India group,” the prospectus says.
Neogi is group head for information technology and telecom at the Sahara group. Before becoming group IT head, Neogi was a member of Subrata Roy’s core team and was, according to his own online profile, mentored by the Sahara chief in various aspects of business — parabanking, aviation, media, real estate and infrastructure.
The company raised Rs 19,400 crore from over 22.1 million investors through the OFCDs. Regulators and courts have used the red-herring prospectus to establish the issue was not in accordance with the law.
Under the head ‘objects’, the prospectus said: “The fund raised shall be utilised for the purpose of financing the acquisition of lands for development of townships, residential apartments, shopping complexes, etc.” In other objects it listed infrastructure activities and power generation.
“Money not required immediately by the company may be parked/invested, inter alia, by way of circulating capital with partnership firms or joint ventures or in any other manner according to the decision of the board,” the prospectus added. The cost of the projects mentioned was “around Rs 20,000 crore.”
WHO’S IN, WHO’S OUT?
* Jan 28, 2008: Vandana Bhargava and Ravi Shankar Dubey appointed as directors
* Feb 29, 2008: Sushanto Roy resigns from board; Ashok Roy Choudhary joins
* Mar 10, 2008: Seemanto Roy and Soodip Neogi quit as directors; board passes resolution to implement optionally fully-convertible debenture (OFCD) issue
* Mar 13, 2008: Red-herring prospectus for OFCD issue signed by Bhargava, Dubey and Choudhary
* Apr 25, 2008: Issue of OFCDs begins
