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After the arrest of Sahara chief Subrata Roy on Friday, his son Seemanto Roy said at a press conference, "From a humble beginning in 1978, Sahara India Pariwar today has a huge asset base, which includes our 1,200,000 karyakartas and more than 80 million investors."
I didn't hear it wrong. Roy reiterated this number at the Supreme Court. It is, indeed, 80 million-three and half times all the Australians in the world.
The group has told the Supreme Court it has repaid most of the 29.6 million buyers of optionally fully convertible debentures (OFCDs) of Sahara India Real Estate Corp and Sahara Housing Invest Corp. Before launching these bond issues, Sahara group ran a residual non-banking finance company, called Sahara India Financial Corp. In 2008, when the Reserve Bank of India (RBI) ordered the company be wound up, it had about 39.4 million deposit accounts. By February 2011, the number of accounts fell to 19.16 million. In August 2011, two months after the Securities and Exchange Board of India (Sebi) ordered the refund of OFCDs, the group advertised it would repay Sahara India Financial Corp depositors and reduce liabilities to nil by December that year. Sahara India Commercial Corp, a third group firm that had also been issuing OFCDs but hadn't been proceeded against by regulators, had 2.6 million investors.
Sahara Asset Management, the group's asset management arm, had about 50,000 investor folios, according to last reported data. And, going by the report filed with the regulator for the quarter ended December 2013, Sahara Life Insurance had sold 10,266 policies, insuring 9,574 lives for a total sum assured of about Rs 100 crore.
A geographical break-up gives an interesting insight into the group's operations. Uttar Pradesh (3,452 policies) and Bihar (2,654) accounted for 60 per cent of these policies. Rajasthan stood third, with 944 policies. The remaining 18 states it had business in contributed 30 per cent.
Its two listed firms, Sahara One Media & Entertainment and Sahara Housing Finance Corp, had a shareholder base of 1,904 and 7,860 investors, respectively.
Thus, investors of the group's regulated entities stand at less than the one million-mark. While that says a story, with the OFCDs refunded, the residual non-banking finance company wound up, and the initial public offering held up, where are the millions?
As you read this, the group's 4,700 service centres (this number has grown threefold since the RBI ban) and its 1.2 million workers (75 per cent growth) will be peddling instruments issued by two group entities Sahara India Cooperative Credit Society and Sahara Q Shop Unique Products.
Are holders of these instruments investors? Do they add to 80 million? Does the figure include the 39.4 million depositors RBI ordered to be refunded and the 29 million OFCD holders claimed to have been refunded already? If so, have RBI, Sebi and the Supreme Court orders been adhered to in spirit?
One thing is for sure-neither the Registrar of Cooperative Societies nor the yet-to-be-born retail regulator will want or have the resources to deal with the 80 million sets of documents lined up outside their offices. Sebi is busy with its own truckloads of documents. On the efforts taken by Sebi to make sense of these documents, counsel Datar said, "The whole game seems to be to tie up Sebi in scrutiny of documents and time keeps passing." Income tax officials are no better off.
I bet nobody ever thought of the regulatory element in 'economy of scale'. At least, nobody used it as well as Sahara.
