Showing posts with label Subrato Roy. Show all posts
Showing posts with label Subrato Roy. Show all posts
Friday, February 28, 2014
Thursday, April 25, 2013
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
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
Wednesday, April 10, 2013
Sahara Group Company has to prove full compliance
Left with little option following SEBI’s order to freeze bank accounts and attachment of properties of two of its group companies, the Sahara Group is planning to move a separate application in the Supreme Court next week asking for an interim relief.
Confirming this move, Sahara counsel Kishore Lahiri told TOI, “If required, we will file a separate application in the Supreme Court asking for interim relief to get rid of the SEBI order. I am surprised how they (SEBI) can pass such an order at this point of time when they know that our interim application is pending in the court.”
Sahara’s application is expected to come up for hearing next week where Sahara would request that it be allowed to furnish security through a credible financial institution to pay the balance installments. It would also plead that since the company has already redeemed significant number of (debenture holders) any further payments to SEBI would amount to double payment, sources aware of Sahara’s next course of action said.
Experts that TOI spoke to about Sahara’s possible options said that the group has to either prove that it has already complied with the obligations or commit that the entire money it took from investors would be returned. “The company has to offer full compliance to get relief. A substantial compliance plea is not going to help. No investors should be left in the lurch,” says an expert.
Sahara has 45 days to file an application with Securities Appellate Tribunal (SAT) against the Sebi order. However finding relief seems difficult as the SEBI order was based on the Supreme Court judgment, said Ashwin Mathew, consultant with Khaitan & Co.
Companies usually file an affidavit with SEBI listing out what they have done and propose to do to comply with the orders in such cases. But Sahara has to move the SC for relief as they do not agree with the market regulator on the amount involved, say experts.
“It’s a case of first instance and sets a trend that SEBI means business and if required, it may go the extra mile. It gives the message to India Inc that compliance and regulations are to be taken seriously. It’s the key takeaway from SEBI’s move to attach properties of Sahara. As far as Sahara is concerned, they can do little than to file a writ petition or seek a stay on SEBI’s order,” Rukshad Davar, corporate partner, Majmudar & Partners, a top tier Indian law firm based in Mumbai, said.
While SEBI has stated that Sahara has to refund Rs 24,000 crore to investors with 15% interest, the company has claimed that the total liability is not likely to exceed Rs 5,120 crore, which it says has already been deposited with the market regulator. Besides, Sahara can also approach the SC urging it to appoint an independent committee of administrators to validate the actual amount to be paid to investors.
SEBI ORDER Sahara employees choose to keep mum
Lucknow: Mum was the word at the business offices of Sahara group on Thursday, a day after the Securities and Exchange Board of India (SEBI) ordered a freeze on the assets and bank accounts of two Sahara Group companies after they failed to repay over Rs 24,000 crore collected from investors.
Employees and officials of Sahara group came to their offices as usual but refused to say anything about the SEBI order.
Tight security arrangements were in place at Sahara Shehar and guards watched the movement of people around the 200-acre space that comprises guest houses, a gymnasium, an auditorium, a call center, offices of HR and corporate communication cell and the pristine white house where group chief Subrato Roy Sahara resides.
An employee said: “We have been asked not to speak to anyone.”
Another Sahara official said, “All communication will be done through the legal cell,”
The Sahara Bhawan and Sahara Tower, situated in Kapoorthala office comprising the real estate, infrastructure and media section of the business conglomerate, too, remained a picture of poise. Employees refused to react to the SEBI order. Some showed signs of apprehension but others maintained that the business and professional environment was “cool and calm”.
The business house is said to employ around 10 lakh people across the globe. This also includes agents, who work on a commission basis for the group which carries out its business activities in finance, infrastructure and housing, media and entertainment, consumer merchandise retail venture, manufacturing and information technology.
Its media wing alone comprises over a dozen publications and electronic/entertainment channels working out of 96 bureaus with a total 2,308 correspondents across the globe and over 1500 V-SATs for news collection, the group website said. The group recently entered into consumer merchandise retail venture, and engages in retail chain of consumer products.
COURTESY:
Piyush Pandey & M Allirajan TNN
http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=TOINEW&BaseHref=TOIM/2013/02/15&PageLabel=25&EntityId=Ar02503&ViewMode=HTML
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