What Sahara teaches you and corporate India

Sahara Group chairman Subrata Roy

The Sahara Group verdict in the Supreme Court will lead to one of two courses - the group will perform the astounding task of returning Rs 24,000 crore, plus interest, to its investors or be liquidated by authorities as they sell off assets to recover the money. Whatever the outcome, this case has revealed a stunning fact —Rural India is rich, very rich!

Sahara India Real Estate Corporation Limited, as it was then known, collected Rs 19,400.87 crore from 66 lakh subscribers in March 2008, according to the Securities and Exchange Board of India (Sebi) order and court proceedings. In the absence of a detailed list of investors stating the quantum of money they invested, a simple math shows that each villager put in at least Rs 29,395.

The Sahara Group has in the past gone on record that they run schemes toward financial inclusion of un-bankable people in rural and semi-urban areas that do not go to a bank, or are visited by a bank.

In his argument before Sebi, the counsel for Sahara confirmed the proletariat status of their investors. TheSebi order describes his defence thus: "He [the counsel] took great pains to explain that for rural areas...investors can be identified by simple names and that is...why names alone have been furnished along with the village of residence."

Bigger than NREG Spend

NREG's official web site shows total national spending in the year ended March 2008 at Rs 15,858 crore. Sahara in that year managed to get one and a half times that amount from its un-bankable investors.

If one Managing Worker can tap into rural India's wealth, what could more such entities do! They could help the urban elite, such as readers of this newspaper, discover their hidden wealth and become a proud part of a parivaar that funds phenomenally profitable ventures such as New York's Plaza Hotel, London's Grosvenor House, Mumbai's Sahara Star, India's cricket team, an IPL Team, Formula 1 car racing, newspapers and TV channels, a luxury resort and township and dozens of ultra-large real estate projects.

Watch & Learn

The Sahara case has teachings for corporate India too. India's largest-ever IPO in 2010 by state-owned Coal India, was at Rs 15,500 crore, dwarfed by Sahara's fund-raise four years earlier. But Sahara may not be willing to share its knowledge that willingly going by the way it runs its various businesses. Not a single of its entities is listed and financial details are very sparse about the group's incomes and liabilities.

Following the court order, Sahara assured its investors their money is safe. "We want to inform all our depositors and investors that you need not worry about anything ..." The group said that in the past 33 years, it had repaid around Rs 140,000 crore in redemption to around 12 crore investors.

Sebi's order in June said that an absence of investor complaints in the past has never been a good measure of risks that investors face. "Most... schemes...which have blown up in the face of millions of unsuspecting investors, have historically never been accompanied by a gradual build up of investor complaints," it said.

Source: economictimes.indiatimes.com