 "Whiff of benami: 1% Sahara investors responded to Sebi")
Guess how many of Sahara’s bond investors are genuine? If the results of a preliminary sample verification exercise done by market regulator Sebi are any guide, the answer is truly shocking.
The results show that just about 1 percent of investors in the optionally fully convertible debentures (OFCDs) issued by two Sahara companies, Sahara India Real Estate Corporation (SIREC) and Sahara Housing Investment Corporation (SHIC), responded to Sebi’s registered letters asking them to confirm their investments.
Both these companies were ordered to return over Rs 24,000 crore collected from investors by paying the money to Sebi first. Not only has Sahara not paid the full amount to Sebi, but its data is now looking increasingly shady - giving rise to the suspicion that many of the investors may be figments of the imagination.
[caption id=“attachment_663807” align=“alignleft” width=“380”] Sebi’s pilot project to verify the genuineness of Sahara’s investors indicates that Subrata Roy’s credibility on this score is sinking.[/caption]
According to a Sebi petition in the Supreme Court seeking the arrest of promoter Subrata Roy and two of his directors, the regulator sent out 21,253 registered letters to Sahara OFCD investors based on information provided by the group. The addressees were asked to furnish their investment details in a prescribed format and submit the relevant documents, including the original bonds issued in their favour.
But only 233 debenture holders responded - a success percentage of just 1.09 percent. Approximately 7,733 letters were returned unopened and undelivered, some with the legend “incomplete address/address not found.” This suggests that at least 36 percent of Sahara’s investors are either non-existent or have moved away from their stated addresses. Or it could mean that the Saharas have not kept proper records of their investors’ addresses. Not exactly a great advertisement for how the group treats other people’s money.
Impact Shorts
More ShortsThe big bulk of 63 percent of the registered letters (13,449) never came back - either the postal authorities could not deliver them or failed to report back to Sebi on what happened to the letters. These letters will, presumably, surface a bit later.
However, what is crystal clear is that only a minuscule percentage of SIREC and SHIC investors seem bonafide at this juncture.
How does this square with the Sahara Group’s assertion today in The Indian Express that Sebi’s allegations are “absolutely baseless, unverified and malicious”. The group even challenged Sebi to prove that even one single investor is bogus.
Earlier, the group said: “There cannot be (even) one fictitious investor…and our workers know each and every investor. It is high time, in the interest of investors, Sebi should also give us chance and importance.”
Since the letters were sent by Sebi on the basis of documents submitted by Sahara itself, and scanned by Sebi-employed officials in the presence of Sahara representatives, the group can’t claim the Sebi fudged these documents.
The Sebi petition says it has so far scanned 1.85 crore investor applications, and commended feeding the data into computers.
Suspicions about the Sahara Group’s benami funding have always been doing the rounds in the media. But these got more credence when Sebi’s former Wholetime Director, KM Abraham, issued an order dated 23 June 2011 in which he first flagged the fact that many of the investors in SIREC and SHIC debentures were untraceable. The Supreme Court found many incongruities in a single effort at verification, that the smell of benami only got stronger.
Sebi’s pilot project to verify the genuineness of Sahara’s investors indicates that Subrata Roy’s credibility on this score is sinking.
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