The Sahara Group is transferring a portion of the recurring deposit accounts holding their optionally fully convertible debentures (OFCDs) to another group entity, the Sahara Credit Cooperative Society, said two group officials. The move comes at a time when two of its group companies are fighting an order by the Securities and Exchange Board of India (Sebi) to refund money to investors, at the Securities Appellate Tribunal(SAT),
The cooperative has been developed by 3,800 workers of the Sahara group. According to Sahara, this entity has been running a few schemes for financial inclusion of un-bankable people in rural and semi-urban areas. Sahara India Real Estate Corp and Sahara Housing Investment Corp may have to refund only a part of the money collected under OFCDs, as a significant portion of the deposits have been transferred to the society, said one of the officials.
In an email response, Abhijit Sarkar, Sahara spokesperson, called the estimates of transfers “speculative” and “misleading”. “The matter is with SAT and the case is sub judice. You must wait till the judgment comes and then you shall naturally know about all the facts and figures of the companies, he said.”
The society was launched in April. According to company filings, Sahara India Real Estate had raised around Rs 6,588 crore by issuing OFCDs till November 2009. The amount raised by Sahara Housing Investment Corp is not available in the public domain. Both companies continued raising money through OFCDs until an April 7 order by the Allahabad High Court stopped it.
The transfer of accounts began late April and by May, investors became part of the cooperative society, said the workers. “The account numbers and passbook will remain the same. Since May, only the company name has been changed because the licence has changed. It is now called Sahara Cooperative Credit Society,” said Fazlulla, a Mumbai-based Sahara worker.
According to the second official, who did not wish to be identified, the company has enrolled most investors under the recurring deposit schemes of OFCDs as members of the cooperative, by paying a fee of Rs 5. Each branch office of Sahara has been given a grant of Rs 5,000 to pay the membership fee.
At the group’s end, the accounts of the two companies had been transferred to that of the society by simply changing the software. The Sahara group uses a software called BRAS (Branch Automation System). “A new upgraded version of the software was supplied to the branches, which started accounting them as accounts under the co-operative society,” the official said.
According to Sebi’s June order, contested by Sahara in SAT, there were large numbers of recurring deposit accounts where the amounts subscribed in OFCDs were in the order of Rs 200, Rs 300 and Rs 400.
In its reply to Sebi, SIRECL said one of the bonds was flexible, with a facility to make instalment payments of Rs 100 or Rs 200 per month, with an option to investors to make payments on weekly/monthly/quarterly/half yearly/annual basis. “I find that such a scheme is akin, if not practically identicals to a typical recurring deposit scheme,” K M Abraham, whole time member, Sebi, had said in the order.
Sebi had made a mention of this attempt by Sahara to move to a new regulatory turf in its order directing refund of money collected through OFCDs.
Referring to a Business Standard report dated April 26, which said Sahara agents would now peddle several new investment schemes to raise money under the name Sahara Credit Co-Operative Society, Abraham observed: “This article refers to what appears prima facie to be an attempt by companies within the fold of the Sahara India Parivar, to adopt a new mode of fund mobilisation through cooperatives formed under the Cooperative Societies Act.”
“I do not make any comment or cast any imputation on the legality of this. Should such a route be actually adopted, it is not within the purview of the proceedings now before me. Nevertheless, from a complaint received in Sebi, I understand that the schemes for fund raising under the newly adopted cooperative route have exactly the same features as the OFCDs in question.”
“Can such a strategy of successively altering the preferred mode adopted for mobilisation of resources, potentially be used by entities to thwart the regulatory framework in the country?” Abraham had said in his order.
