The Telegraph
Saturday , March 1 , 2014
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Friends in high places but high table elusive

Mumbai, Feb. 28: Subrata Roy’s carefully-built empire came under siege on August 31, 2012 — and his arrest today could mark the start of the denouement to an incredible rags-to-riches story that began 36 years ago.

Exactly 18 months ago, the Supreme Court had struck down the bond flotations by two unlisted Sahara group companies and ordered them to repay Rs 17,400 crore along with 15 per cent interest to 2.96 crore investors.

“People cannot accept Sahara’s meteoric growth… we have been at the receiving end of the bashing from all authorities again and again,” Roy said in an emotionally-charged letter that he sent out the same day that the apex court gave its verdict to media offices across the country.

The Bengali entrepreneur, who was born in Araria in Bihar before his family moved to Gorakhpur in Uttar Pradesh, has always had an uncanny ability to raise enormous sums of money from unexplained sources.

He has lived in the dark penumbra of regulation, ducking and weaving to evade oversight by financial regulators. When challenged, he has revelled in a slugfest with regulators, sulked when orders went against him and preened when they did not.

Never backing off from a battle with the regulators, he has stalled on the strength of court orders, railed against authority, rubbed shoulders with powerful politicians and hung out with the biggest stars in Bollywood.

But yet he never quite gained acceptance in the opulent anterooms of the rich and the powerful who remained somewhat disdainful of his earthy background and somewhat repelled by the dark and sinister manner in which his 12 lakh-strong Sahara Pariwar seemed to operate.

The perceptions were reinforced by the homegrown appellations that the group seemed to have a penchant for. Roy himself was called Saharasri and his employees were the kartavyayogi karyakartas, slapping off their trademark salute whenever they met him or visitors by placing their right hand across their chest and saying “Sahara Pranam”.

Ever since he burst on the scene in 1978, Roy was able to marshal an army of deposit-seeking agents who ostensibly beavered away in the hinterlands of the country to raise cash with the promise of eye-popping returns.

He had started a para-banking outfit in Gorakhpur with just Rs 2,000 and quickly clambered up the grease pole of ambition to eventually create a Rs 80,000-crore empire that served eight crore investors.

Let’s put that in perspective: Reliance Industries, the country’s biggest private conglomerate with revenues of Rs 3.79 lakh crore at the end of March 2013, has an investor base of just over 30 lakh.

The deposit party came to an end when the RBI declared group company Sahara India Financial Corporation as the first of only two residuary non-banking companies (RNBCs). As an RNBC, Sahara India Financial Corporation could still raise deposits — unlike other non-banking financial corporation (NBFCs) — but with a difference.

It could raise deposits for a minimum period of 12 months and a maximum of 84 months, always making sure that the sum of the deposits it raised and the amount it invested was greater than the liabilities it owed to the depositors. Moreover, it could not accept deposits that would be repayable on demand as, for instance, in the case of a fixed deposit with a bank.

Troubled times

The Sahara group has been roiled by crisis several times in the past and has mostly come out fairly unscathed. But this time it could be hard to wriggle out of the tight corner in which it has been wedged.

The first sign of trouble for the Sahara group emerged in 1995 — just when a period of political uncertainty had started brewing. Income tax sleuths went after it, questioned its accounts and grilled its officers. The upshot of that tax wrangle was that Sahara was denied massive tax refunds, putting its finances under severe strain.

“The tax department held on to our refunds to the tune of Rs 2,000 crore for decades,” Roy said in his letter to the media in August 2012 that fulminated against the regulatory authorities. “Ultimately, they had to pay us back the entire amount in the year 2011.”

More trouble brewed in 2008 when the Reserve Bank of India barred its residuary non-banking company from raising deposits and ordered it to repay the entire amount it had raised within seven years. Sahara challenged the order but later claimed to have paid out the sum in a space of four years.

Between 2001 and 2010, Roy seemed to be on a roll: he had amassed a tremendous fortune and started to grab a string of trophies. He teamed up with debt-laden liquor baron Vijay Mallya and paid $100 million for a 42.5 per cent in the Force India Formula One auto racing team. He stumped up $370 million for the Pune Warriors team in the Indian Premier League and then forked out £470 million to purchase London’s Grosvenor House hotel from the Royal Bank of Scotland.

He flirted with the idea of buying English Premier League soccer club Liverpool and also held talks to buy the debt of film studio Metro-Goldwyn-Mayer but could not close those deals.

With the flood of money came the hubris. Roy scrapped with the Board for Cricket Control of India’s bigwigs and refused to pay a Rs 170-crore bank guarantee for the IPL franchise and promptly got thrown out of the cricket league.

In a fit of pique, he threatened to scrap his sponsorship deal with the Indian cricket team. Last December, he lost the bid for the renewal of his sponsorship of the team to Star India.

Celebrity circles

Roy has always had a flamboyant side and celebrities have flocked to his extravagant events.

In 2002, Amitabh Bachchan and Aishwarya Rai had joined Sahara India as council directors along with cricketer Kapil Dev.

Roy has also been great friends with actress Sridevi and her husband Boney Kapoor. In 2007, they were by Roy’s side when he launched Studio Nysa in Mumbai — a state-of-the-art studio facility catering to recording, editing, mixing and mastering of music under one roof. Last April, Roy threw a party to celebrate Sridevi’s Padma Shri.

Boney Kapoor was appointed as an additional director of Sahara One Media and Entertainment Ltd — a listed entity — in August 2011 and re-appointed as director in September last year. He was also named CEO of Sahara Motion Pictures but replaced by Sandeep Bhargava in January 2013.

But in December 2013, rumours swirled that Roy and Boney had fallen out over a loan to make the film No Entry.

The Sahara group continues to assert that it owes only Rs 5,120 crore to the investors, which it has already paid into an escrow account with Sebi in December 2012. The remaining sum, it claims, had been refunded to the investors.

The battle will head to the courts on March 4. Roy has weathered many storms in the past. This fight will test his ability to break the siege and save his 36-year-old empire.