ED files laundering case against two Sahara firms

MUMBAI: In what may spell more trouble for the Sahara Group and its chief Subrata Roy, the Enforcement Directorate (ED) on Thursday registered cases under PMLA against two firms. A Sahara Group spokesperson refused to comment, saying he wasn’t aware of the development.
In what may spell more trouble for the Sahara Group and its chief Subrata Roy, the Enforcement Directorate (ED) in Mumbai on Thursday registered cases under Prevention of Money Laundering Act (PMLA) against two firms.

The ED will soon issue summons to Roy and three directors of the group asking them to remain present before the central agency to record their statements.

The ED registered two separate cases following complaint filed by market regulator Securities and Exchange Board of India (Sebi).

Sebi had accused Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing Investment Corporation Ltd (SHICL) of committing various illegalities while raising Rs24,000 crore from investors. The companies had raised the amount by issuance of certain bonds.

In February, Sebi ordered freezing of properties of the two firms and their top executives.

The action came following a Supreme Court (SC) directive ordering the firms to refund money with certain interest. The SC had also instructed Sebi to give refunds to genuine investors from the money the group had deposited with the market regulator.

ED officials said now that cases had been registered formal investigation wil begin against the two companies.

Sources said the agency wil verify information that crores of rupees have been transferred outside the country in the name of investment. It also wants to verify allegations that a large number of investors were dummy and that many shell companies had invested in the group.

According to sources, the ED is also investigating if money was routed to Mauritius in 2011.

Officials said the bank details submitted by the group also raises many questions on the investments.

A Sahara Group spokesperson refused to comment saying he wasn't aware of the development.
Courtesy:
21 Jun 2013, Hindustan Times (Mumbai)
http://paper.hindustantimes.com/epaper/viewer.aspx

BANKER’S TRUST REALTIME : Four lessons from Sebi-Sahara spat

What should Sebi do to get to the bottom of Sahara case?
India’s apex court has once again expressed its unhappiness with Subrata Roy’s Sahara India Pariwar, a Lucknow-based conglomerate that has at least 4,100 establishments in its fold and Rs.1.18 trillion in assets spread across real estate, infrastructure, media, hospitality, sports and finance. “You are manipulating courts,” a Supreme Court bench, consisting of judges K.S. Radhakrishnan and J.S. Khehar, said on Monday in reference to the group approaching different forums for relief in a legal battle with the stock market regulator. The bench wanted to know why Sahara was refunding money directly to investors and not routing it through the Securities and Exchange Board of India (Sebi), as has been directed by the court.

The group claims that Sahara India Real Estate Corp. Ltd (SIRECL) and Sahara Housing Investment Corp. Ltd (SHICL) have already paid back some Rs.19,000 crore to investors who purchased securities sold by the two firms. Instead of providing a list of people who have received their refunds, the group has been filing appeals in various courts. Sebi wants a few directors of these two companies, including Roy, detained for delaying the refunds.

In August 2012, Radhakrishnan and Khehar asked Sahara to pay back Rs.24,000 crore and directed a retired Supreme Court judge, B.N. Agarwal, to oversee the process. Since then, Sebi has been struggling to get the investors’ money back.

What should it do to get to the bottom of the case which, according to Sebi counsel Arvind Datar, keeps getting “curiouser and curiouser”?

First, it can ask Sahara to provide the list of the top 1% or 5% of investors in the bonds sold by SIRECL and SHICL. Typically, the top 1-5% “creamy layer” of investors account for 20-25% of the money invested. This will make life easier for Sebi and also Sahara as it won’t have to send truckloads of documents to the regulator.

Second, Sebi can also look at the concentration of the investor base. If it can locate five geographical pockets, it would become easier to get a fix on the investors as Nandan Nilekani’s Aadhaar unique identity number project can do the rest of the job.

Finally, Sebi could ask Roy from which banks he withdrew the money to pay investors. He may have been paying cash but certainly he cannot keep Rs.19,000 crore in gunny bags at home or in the Sahara offices. In other words, had he indeed paid Rs.19,000 crore to the bond investors, he would have withdrawn that money from the banking system.

Sebi has been following the directives of the Supreme Court diligently but it lacks the acumen to deal with Roy.

How could Roy find himself in such a situation? The Sahara chief refused to give information to Sebi and thought he could get away with it, but now the apex court is seeking the same details from him. Had he provided the information to Sebi, he would not have found himself in such a mess.

It may or may not be the end game for Roy but many lessons can be learnt from the Sebi-Sahara spat.

First, it’s a vindication of the independence of the judiciary. In this case, justice may have been delayed but definitely not denied. The Supreme Court has demonstrated that politicians cannot shield a businessman for ever.

Second, it’s a lesson for the Indian financial system on its loopholes and how any smart entrepreneur can use regulatory arbitraging to his advantage.

Third, if indeed the two Sahara group firms had 30 million investors in their bonds, the Indian financial system can learn lessons in financial inclusion from Roy. The total number of demat accounts in India is about 20 million.

Finally, if Sahara fails to furnish the correct list of investors, the money for which there are no takers will flow into the government’s consolidated fund for investor education. That will deal a blow to Roy’s business model.

Note: Sahara has filed a defamation case in a Patna court against Mint’s editor and some reporters over the newspaper’s coverage of the company’s disputes with Sebi. Mint is contesting the case.

Banker’s Trust Realtime is a frequent blog by Tamal Bandyopadhyay, who writes a popular weekly column Banker’s Trust.
Courtesy:
Tamal Bandyopadhyay
First Published: Tue, Apr 23 2013. 01 34 PM IST
Updated: Tue, Apr 23 2013. 11 04 PM IST
http://www.livemint.com/Opinion/XYjUISOXNEpopbydhzSOpN/BANKERS-TRUST-REALTIME--Four-lessons-from-SebiSahara-spat.html

Sahara Group Realty investors left in lurch

New Delhi: It’s the real estate investors and customers of two Sahara group companies - Sahara Housing Investment Corporation (SHICL) and Sahara India Real Estate Corporation (SIRECL) - who stand to lose the most as a result of the Sebi order.

The chances of completion of the projects that these two companies had undertaken are not very high since SEBI has attached the properties, said a real estate expert on condition of anonymity. The Sahara group had sold a number of projects in cities like Bangalore, Chennai and Mohali. Customers who invested in these projects are going to be adversely impacted. The group is said to have a land bank of nearly 27,000 acres across the country.

Another real estate expert said that since most of the recoverable investment of the group is in real estate Sebi will sell them to repay outstanding dues of bondholders. Only after repaying bondholders, the money will be used for investors in the real estate projects. This process will take a long time to complete and investors will suffer.

Over a period of time, the group has created huge assets in the real estate sector. So far, the group has launched housing projects in 19 cities. During June 2012, the group had launched 10 integrated township projects in 10 cities on over 900 acres of land. The towns in which the group had launched projects included Pune, Aurangabad, Jodhpur, Gwalior, Bareilly, Solapur, Porbandar, Katni, Kashipur and Cuttack. Sahara has also launched seven projects, which the group claimed, are already under construction, in Lucknow, Jaipur, Indore, Nagpur, Ahmedabad, Satna and Coimbatore.

The group is also implementing a mega city premium project called Ambi Valley near Pune. A large number of investors are understood to have invested in these projects. The group had also launched a new affordable housing brand called Sahara Swapna City that is to be built on smaller land parcels across 360 cities, the group claimed. An investment of Rs 500-600 crore would be required for each Sahara City Homes project, while the affordable homes project will require nearly Rs 100-125 crore, which are normally financed through customer advances and bank funding.

No loan exposure to Sahara: SBI
Mumbai: State Bank of India has said that it holds around Rs 800 crore of Sahara group in the form of deposits but does not have any loan exposure. The bank said that its operations would not be impacted if the deposits were to be withdrawn. Other public sector banks also said that they do not have any loan exposure to the group. TNN
COURTESY:
Prabhakar Sinha TNN
http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=TOINEW&BaseHref=TOIM/2013/02/15&PageLabel=25&EntityId=Ar02505&ViewMode=HTML