The Sahara game or the wolf of Dalal street

SUBRATA ROY - SAHARA GROUP CHAIRMAN

When we discuss anything about SAHARA group, we will come to know about  rags to riches story of Shri. Subrata Roy. 

Why this hue and cry for Sahara group. The bone of contention is issue of OFCD (optional fully convertible debentures). Now I don't have any option but to go to my mentor Shri. Superman to know about these issue. 

Superman's version:

There are two methods by which a company can generate cash for their requirements: 

1. Debt instruments (loans, bonds, angel investors, debentures) 

2. Equity instruments (shares) 

Usually companies always maintain a desired ratio of debt and  equity as there are different norms for both of them. 

Debt instruments:

Usually bonds are issued by government, viz. state government, RBI, and other PSUs. 

Whereas debentures are issued by private corporations to meet their cash requirement. 

OFCD ( optional fully convertible debentures) 

In these kind of debentures issuer provides the option to the debenture holder that after a certain period, these debentures will be converted under equity, i.e. shares of the corporation. 

THE BIG SAHARA GAME 

Mr Roy floated two companies 

1. Sahara Housing Investment Corporation 

2. Sahara Real Estate Investment Corporation 

These are not listed with any stock exchange corporation in India. 

Mr Roy raised funds nearly to the tune Rs. 24,000 Cr. Now if he wanted to do so, the corporation should have wrapped this exercise in fifteen days or the stipulated time, but they did so for a grand TWO years . As per SEBI (Securities Exchange Board of India) Amendment Act 2012 and 2013, all the securities related matter will fall under their jurisdiction and SEBI aptly filed the case. 

Now the main issue is where are the investors of this ponzi scheme.  Nobody has come out in the open in this case . Even if we go by the version of SAHARA corporation, the majority number of investors are from semi-urban and rural households, then why there is hesitation in transfer of money/capital invested.

Court has directed the corporation to return the money with 15% interest.  In case if they are unable to trace the investors, then money will be returned to government. 

As far as a common man is concerned, nobody will pay a penny more for anything.  Who will let go of his/her hard earned money invested in SAHARA corp. Is it the biggest black to white money conversion in Indian history? Are the financial pundits ready to accept it?  

Its really difficult for Mr. Roy to arrange Rs. 10,000 Cr for bail bonds and financial fraud committed by him has directly thrown him into the jail. 

Food for thought - The Ethmos View

List both the companies, do the market survey and research to fix the share price . if company is able to trace the investors, then issue the shares in demat form . in case the company is unable to trace the investors, then the cash raised will be returned to the concerned district authorities of the district from where the investors have invested the money through the local SAHARA office  and money will be utilized for construction of schools and hospitals under the supervision of SEBI officials, the report of which should be submitted to the court on a quarterly basis. 

We at ETHMOS believe that there is a solution for every issue . 

Another Ethmotican View:

The contention of Sahara that he cannot trace the investors is a spoof because every company has to maintain clear KYC of its investors even if it is receiving Re. 1/- from any person.  The probable reality is that at least 50% to 60% of this money is the black money of various people related to Sahara which they wanted to make white (as mentioned in the article).   And the solution offered is also superb but there is a chance of corruption in this because then every Tom Dick and Harry will claim himself to be an investor in the group and want a share of the pie once the listing is done on the exchange.

A better way would be to conduct a complete forensic audit of the company including the bank account of the company along with its directors and top officials to get the trail of the money - a.k.a. FINANCIAL TRAIL AUDIT as discussed in one of our articles.  And audit should be conducted by an independent organization like CAG or any auditing institution of repute or any society like Ethmos.  It is also likely that the company was grossly overvalued for getting undue benefits.

Happy ETHMOS to all.