How a Rs 37,000-cr mountain rose against Sahara

That's the amount payable by the Sahara group firms, according to Sebi's latest statement

On March 4, when Subrata Roy was arrested and produced before the Supreme Court (SC), the group offered to produce a bank guarantee of Rs 22,500 crore (Rs 225 billion) in full settlement. But on Friday, when Sahara proposed paying an instalment of Rs 17,400 crore (Rs 174 billion), the Securities and Exchange Board of India (Sebi) said dues were well over Rs 37,000 crore.

Where does this number come from?

Sebi lawyers pointed out an August 2012 order, where the SC bench said “Sahara would refund the amounts collected through red herring prospectuses dated 13.3.2008 and 16.10.2009 along with interest @15 per cent per annum to Sebi from the date of receipt of the subscription amount till the date of repayment, within three months from today”. Here are some rough calculations.

The last subscription, according to Sahara, was April 13, 2011. The amount it raised on this date was Rs 25,781.37 crore (Rs 257.81 billion), according to Sahara’s affidavit. Simple interest at 15 per cent amounts to Rs 3,867.20 crore (Rs 38.67 billion) a year. For two years and eleven months between April 2011 and March, it adds to Rs 11,279.35 crore (Rs 112.709 billion).

Thus, the total payable by Sahara is at least Rs 37,060.72 crore (Rs 370.61 billion) because the group will need to pay more interest to subscribers who signed up before April 13, 2011.

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Sahara India Real Estate Corp filed its draft red herring prospectus to issue optionally fully convertible debentures on March 13, 2008. The issue began on April 25, 2008. The relevant dates for Sahara Housing Invest Corp were October 6, 2009, and November 20, 2009.

When Sebi passed an interim order directing the two firms to stop raising funds in November 2010, it did not specify an amount as the companies had refused to furnish details. Subsequently, in an application to obtain a stay in the Allahabad high court, Sahara India Real Estate Corp quoted a corporate affairs ministry filing to say it had collected Rs 4,843 crore (Rs 48.43 billion) till June 2009. This was the number declared by Sahara India Real Estate Corp in its June 2009 filing with the ministry.

No other number was available to Sebi. On April 7, 2011, the high court vacated the stay on the Sebi order, effectively bringing the shutters down on Sahara’s money-raising through optionally fully convertible debentures.

The June 2011 final order by Sebi, too, did not quote an amount, but said whatever was raised through the two draft red herring prospectuses would have to be refunded “to the subscribers of such optionally fully convertible debentures with interest of 15 per cent per annum from the date of receipt of money till the date of such repayment”.

At this point, it was still not clear how much Sahara India Real Estate Corp had raised between November 2009 and April 2011, when the issue was stopped. No number was available for Sahara Housing Invest Corp because it did not file details with the ministry.

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Subsequently, during hearings in the Securities Appellate Tribunal (SAT), where Sahara went in appeal, presiding officer N K Sodhi directed the companies to file details of how much these had raised.

On September 14, Sahara India Real Estate Corp counsel Fali Nariman told the tribunal his client had raised Rs 19,400.87 crore (Rs 194.01 billion) between April 25, 2008 and April 13, 2011. After deducting Rs 1,744.34 crore (Rs 17.44 billion) in premature refunds, it had Rs 17,656.53 crore (Rs 176.57 billion) due on August 31, 2011.

Sahara Housing Invest Corp also submitted its affidavit on the same day. Though details were not immediately available, over the next couple of days it was reported Sahara Housing Invest Corp had raised Rs 6,380.50 crore (Rs 63.8 billion) till April 13, 2011, and had Rs 6,373.20 crore (Rs 63.73 billion) due on August 31, 2011.

The sum of these two numbers gave the case its most quoted figure of Rs 24,029.73 crore (Rs 24.3 billion).

But other numbers continued to pop up. In October 2011, SAT issued its order upholding the Sebi ruling on refunds. It issued two separate orders for the companies.

In the detailed order against Sahara India Real Estate Corp, SAT ruled: “The issue of optionally fully convertible debentures floated by the company is an open-ended scheme and it started collecting subscriptions from investors from April 25, 2008, till April 13, 2011, the company had collected Rs 19,400,86,64,200. As on August 31, 2011, the company had a total collection of Rs 1,76,56,53,22,500 after meeting the demand for premature redemption. This amount has been collected from as many as 2,21,07,271 investors.”

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For Sahara Housing Invest Corp, SAT just said, “Same order as in appeal no 131 of 2011 decided on 18.10.2011.” Thus, the number of investors and refunds due, which were facts pertaining to Sahara Housing Invest Corp, did not find a mention in SAT’s orders, though both companies were required to refund the amounts raised by these.

The sum of Rs 17,400 crore (Rs 174 billion), for which the Sahara group on Friday put up an instalment plan, made its debut in an appeal filed by the group in SC, challenging SAT’s order.

In its final order SC said “the direction issued to refund a sum of Rs 17,400 crore, on or before 28.11.2011, was extended”.

The Rs 17,400-crore figure was then repeated in an SC order, directing the companies to secure assets to pay the liabilities of debenture holders. “By the impugned order, the appellants have been asked by SAT to refund a sum of Rs 17,400 crore approximately on or before November 28, 2011. We extend that period up to January 9, 2012,” the apex court then said.

In their December 2011 submissions before SC, the companies reiterated the numbers adding up to Rs 24,029.73 crore (Rs 240.3 billion), earlier submitted before SAT.

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On November 30, Sahara turned up with demand drafts for Rs 5,120 crore (Rs 51.2 billion) claiming the remaining sum had been repaid directly to investors. A day later Sahara issued advertisements in leading national dailies claiming “we have cleared around Rs 33,000 crore (Rs 330 billion) liability”.

Another number. The Rs 5,120 crore (Rs 51.2 billion) payment left a balance of Rs 18,909 crore (Rs 189.9 billion) from the original Rs 24,029 crore (Rs 240.29 billion). Including interest, the figure became “over Rs 20,000 crore (Rs 200 billion)”.

The Rs 17,400-crore (Rs 174 billion) figure resurfaced in an order passed by an SC bench headed by the chief justice on December 5, 2012. It said, “The appellants shall immediately hand over the demand drafts, which they have produced in court to Sebi, for a total sum of Rs 5,120 crore (Rs 51.2 billion) and deposit the balance in terms of the order of 31 August, 2012, namely, Rs 17,400 crore and the entire amount, including the amount mentioned above, together with an interest at the rate of 15 per cent, per annum, with Sebi in two instalments.”

More figures came out during Roy’s offer to SC to submit title deeds and bank guarantees. As the entire refund theory was rejected by SC, in December 2013 title deeds claimed to be worth Rs 20,172 crore (Rs 201.72 billion) were submitted to Sebi to cover the balance amount payable by Sahara. While Sebi has been saying it does not have the resources to execute the sale of these assets, it did not openly dispute the amount itself during arguments.