India Dispatch: Sahara group has been given more time to repay billions of dollars raised through bond sales which were later found to be illegal.
Sahara given more time to repay
India's Sahara group has been given more time to repay billions of dollars raised through bond sales that were later found to be illegal.
Sahara, a conglomerate, renowned for sponsoring the Indian cricket team, has interests ranging from a stake in a Formula One team to property. It has been ordered by the Supreme Court to make the payments in three instalments, with the last due by the first week of February.
The court ruled in August that Sahara had failed to comply with financial regulations when it raised funds by selling bonds to millions of investors, many of whom were small investors from rural India. At that time, it ordered Sahara to repay the money within 90 days with 15 per cent interest.
"Where is the 24,000 crore [240 billion rupees or Dh16.23bn]? Whether you are going to deposit it with interest or not is the only question before the court," the judges asked Sahara's lawyer in court on Wednesday, The Times of India reported. "Why should we give even a minute more to you?"
But the court decided to extend the deadline to protect the investors. The payments have to be made to the markets regulator, the Securities and Exchange Board of India (Sebi).
It is not clear exactly how much Sahara will actually have to pay, as there is a discrepancy in figures that have been stated by the court and those that have been issued by the company's lawyers.
"Today, Sahara was ready to offer bank guarantee of 14,780 crore rupees so that this amount, plus 2,620 crore rupees, will become 17,400 crore rupees," according to a statement issued by Sahara's lawyer Satish Kishanchandani. "Pay orders for an aggregate amount of 5,120 crore rupees should be paid to Sebi and remaining amount be paid in two instalments of 10,000 crore rupees in the first week of January 2013, and the remaining amount in the first week of February 2013."
In a rags-to-riches story, Sahara was founded by Subrata Roy Sahara, starting with capital of 2,000 rupees in 1978. It now has an asset base of more than US$10bn (Dh36.7bn).
The group recently bought the Plaza hotel in New York for $575 million and in 2010 it bought the Grosvenor House hotel in London. The company's interests span across sectors including media and manufacturing.
Sahara bought its stake in the Force India Formula One team for $100m from the Kingfisher billionaire Vijay Mallya. It also developed Aamby Valley City, a sprawling luxury holiday home development in Pune. Sahara owns the Pune Warriors cricket team.
The bonds case is not the first time that Sahara has run into trouble. In 2008, Sahara was forced by the Reserve Bank of India to stop taking deposits from the public because of concerns surrounding the security of the investments into which the money was going.
Sahara did not respond to a request for comment.