{"id":1309,"date":"2012-12-10T17:05:15","date_gmt":"2012-12-10T11:35:15","guid":{"rendered":"http:\/\/teekhapan.wordpress.com\/?p=1309"},"modified":"2012-12-10T17:05:15","modified_gmt":"2012-12-10T11:35:15","slug":"saharas-numbers-dont-add-up-ads-confuse-dont-clarify","status":"publish","type":"post","link":"https:\/\/vivekkaul.com\/2012\/12\/10\/saharas-numbers-dont-add-up-ads-confuse-dont-clarify\/","title":{"rendered":"Sahara\u2019s numbers don\u2019t add up: ads confuse, don\u2019t clarify"},"content":{"rendered":"

\"\"<\/a><\/span>
\nVivek Kaul and R Jagannathan<\/span><\/span><\/span><\/strong>
\nThe Sahara group sure has a way with numbers. A separate number for separate occasions.
\nOn 1 December this year, an advertisement issued by the group said two of its companies \u2014 Sahara India Real Estate Corporation (SIREC) and Sahara Housing Investment Corporation (SHIC), which fell foul of Sebi \u2013 had returned Rs 33,000 crore of money collected through optionally full convertible debentures (OFCDs).
\nThe ad read: \u201cWe 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.\u201d
\nOn 5 December, a Supreme Court bench headed by Chief Justice of India Altamas Kabirextended the deadline<\/a>\u00a0for 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.
\nA Sahara ad released on 9 December claimed it owed investors only Rs 2,620 crore as on date. It mentions that \u201cTotal liability was around Rs 25,000 crores of both the OFCD companies\u201d (N<\/span><\/span><\/span>ote: since there are no dates, nothing can be verified<\/span><\/span><\/span><\/em>), 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 \u2013 adding an extra Rs 2,500 crore in case there were any discrepancies.
\nSahara has a lot of explaining to do. The group, whose attitude has been described as \u201cshaky\u201d by the Supreme Court, is not telling us the real story.
\nThe 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.<\/span><\/span><\/span>\u00a0(Read the full judgment\u00a0here<\/a>)
\n<\/span><\/span><\/span><\/em>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?<\/span><\/span><\/span>
\nThe 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.
\nSahara offered investors three types of bonds through SIREC \u2013 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.
\nThe bulk of the investors opted for the first two bonds \u2013 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?
\nAs\u00a0<\/span><\/span><\/span>Firstpost<\/span><\/span><\/span><\/em>\u00a0noted earlier, a majority of SIREC\u2019s 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.
\nThe 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 \u2013 which meant only in 2013 and not earlier?
\nThere 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.
\nThe refund patterns disclosed in the Supreme Court\u2019s judgment tell their own story.
\nOf 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 \u2013 leaving a balance of Rs 17,656.53 crore.
\nIn 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 \u2013 leaving a balance of Rs 6,373.20 crore.
\nThese 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.
\nThe questions are clear:
\nWhy 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?
\nHow 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\u00a0dues of Rs 24,029 crore become Rs 2,160 crore<\/a>, or even Rs 5,120 crore?
\nDid Sahara really refund the money or shift it to different schemes? Or why else would Sebi issue ads warning investors to avoid Sahara approaches?\u00a0<\/span><\/span><\/span>Business Standard<\/span><\/span><\/span><\/em>\u00a0<\/span><\/span><\/span><\/a>clearly reports that investors under pressure are\u00a0 moving their money.
\nThe newspaper reported that agents of the Sahara group were being pushed to collect\u00a0<\/span><\/span><\/span>sehmat patras<\/span><\/span><\/span><\/em>\u00a0(consent letters) from investors to show that their money had already been returned to them. \u201cAgents, 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,\u201d the newspaper reported.
\nAlso, money was being transferred to the new Q Shop venture launched by the group. The newspaper adds: \u201cWhile 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.\u201d
\nWhat is interesting nonetheless is that the December 1 advertisement of Sahara makes a slightly different point. \u201cSurprisingly in the Hindi belt particularly, we find the name of hundred of different persons, even the area names, including Village, Mohalla, Towns, Cities match. Most surprisingly many many fathers\/husbands names also match, so it is very difficult to authentically ascertain the pattern of reinvestment, but through verbal conversations and also through computer data matching we try to understand the pattern. There is always persuasion by field workers out of their good relation with investors for reinvestment. We have vaguely observed that a good percentage of depositors\/investors do not come back and go away with 100% of maturity\/redemption amount. Another good percentage keep back their principal investment amount but they accept field workers request and reinvest the amount of earning with the company and a big percentage reinvest the full amount\u201d.
\nHow different is good percentage from a big percentage? Why can’t the company put out some real data especially when the advertisement goes onto to claim with utmost confidence that \u201cif you go through the figures, you shall see a similar behaviour in all other institutions where commission is paid like Post Office, LIC etc.\u201d
\nIf Sahara can be so confident about the money going into Post Office investment schemes, and premium being paid towards Life Insurance Corporation of India’s insurance plans, then it can surely give us a little more detail about the money that it raises.
\nSahara has a lot of explaining to do. The group, whose attitude has been described as \u201cshaky\u201d by the Supreme Court, is not telling us the real story.<\/span><\/span><\/span><\/span><\/span>
\nThe\u00a0article<\/a>\u00a0originally appeared on www.firstpost.com on December 10, 2012.<\/span><\/span><\/span>
\n\u00a0<\/span>
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\n<\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

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 \u2014 Sahara India Real Estate Corporation (SIREC) and Sahara Housing Investment Corporation (SHIC), which fell foul of Sebi \u2013 … <\/p>\n

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