India’s embattled Sahara conglomerate has been funneling cash from small savers to fund one of its biggest projects, a luxury resort south of Mumbai, according to documents reviewed by reporters.
Sahara has ploughed at least 15 billion Indian rupees (US$221 million) from two of its credit cooperatives into the Aamby Valley resort project through investments in preference shares, according to documents filed with India’s companies regulator.
It is doing so as some investors in its credit cooperatives complain they have struggled to get Sahara to pay out their matured time deposits — even for sums as low as 30,000 rupees.
Photo: Reuters
NOTHING ILLEGAL
The credit cooperatives investments into Aamby Valley are not illegal.
Cooperatives are allowed to invest in shares and bonds of infrastructure and real estate companies after board approval, if they are in the interest of the cooperatives, according to the law under which these cooperatives operate.
Responding to queries, a spokesman for Sahara Credit Cooperative Society Ltd said in an e-mailed statement that “all required approvals” were in place and the investments would not put investors at risk. He did not elaborate.
Sahara Credit Cooperative had shares worth 10.39 billion rupees in Aamby Valley, according to Aamby Valley’s 2014 annual report.
Saharayn E-Multipurpose Society Ltd, which had shares worth 4.6 billion rupees in the resort, did not respond to requests for comment.
However, some experts say if Sahara is using deposits from the cooperative societies to finance Aamby Valley, members of the cooperatives might face difficulty recouping their money.
That is because the conglomerate is under pressure to sell off some of its prized assets to pay off investors in a savings deposit scheme India’s Supreme Court has declared illegal.
SUPREME COURT CASE
The two credit cooperatives could be hit “if Aamby Valley is monetized and the proceeds are given up to the investors of the earlier financial schemes, which is sitting in the Supreme Court,” said Prem Rajani, founding partner of Mumbai-based law firm Rajani Associates, which works in the areas of banking and finance, and corporate litigation.
The Indian Supreme Court is to decide tomorrow whether to appoint a receiver to auction off some of Sahara’s properties as part of efforts to refund investors in the banned savings deposit scheme.
A senior official from the Indian Ministry of Agriculture’s credit cooperatives division, which regulates the cooperative societies that operate across state lines, said Sahara could be “misusing provisions of the law” that govern credit cooperatives by investing some of the cooperative funds into Aamby Valley.
The division will look into the matter if they receive any complaint on this, the official said.
Over the past four decades, Sahara founder Subrata Roy used his series of small deposit plans to build Sahara into an empire that encompasses businesses ranging from New York’s Plaza hotel and London’s Grosvenor House, to television stations, property projects and a stake in a Formula One racing team.
TWO-YEAR STRUGGLE
However, Sahara has been struggling financially since the Supreme Court in 2014 ordered the conglomerate to repay investors in a 2008 to 2011 Sahara time deposit plan that it declared was illegal.
Roy has been in jail for the past 22 months for not complying with the court’s order to return 360 billion Indian rupees to investors.
Spread over 4,000 hectares in the hills of western India, Aamby Valley bills itself as India’s first planned city since independence: a sprawling resort of luxury chalets, artificial lakes and an airport, favored by the business elite and Bollywood stars.
Sahara said in a statement that the Aamby Valley project was valued at about 1 trillion rupees, citing a 2014 report of property consultant Knight Frank’s India unit.
The Securities and Exchange Board of India, which had asked the court to order Sahara to repay millions of investors in its 2008 to 2011 time deposit plan, has pegged the valuation of lands owned by Aamby Valley and its units at about 405 billion rupees.
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