Sahara funnels cash from small savers to keep Aamby Valley afloat

Mumbai: The Sahara conglomerate has been funnelling cash from small savers to fund one of its biggest projects, a luxury resort south of Mumbai, according to documents Reuters reviewed.

Sahara has ploughed at least Rs 1,500 crore ($221 million) from two of its credit cooperatives into the Aamby Valley resort project through investments in preference shares, according to documents filed with the companies regulator, as some investors in its credit cooperatives complained of having struggled to get Sahara to pay out their matured time deposits — even for sums as low as Rs 30,000.

The credit cooperatives investments into Aamby Valley are not illegal. Responding to Reuters queries, a Sahara Credit Cooperative Society Ltd spokesman said via email 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 Rs 1,039 crore in Aamby Valley, according to its 2014 annual report. Saharayn E-Multipurpose Society Ltd, which had shares worth Rs 4,600 crore in the resort, did not respond to requests for comment.

Risky Investment?

The two credit cooperatives could be hit “if Aamby Valley is monetised 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 Supreme Court will decide next Tuesday whether to appoint a receiver to auction off some of Sahara’s properties to refund investors in the banned savings deposit scheme. A senior official agriculture ministry official 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.

Investors not paid

Sahara has been struggling financially since the Supreme Court ordered it in 2014 to repay investors in a 2008-11 Sahara time deposit plan that it declared was illegal. Founder Subrata Roy has been in jail for the past 22 months for not complying with the Court’s order .

Reuters has spoken to dozens of savers who said Sahara had not given them their money when their deposits matured. Instead, they complained, Sahara’s agents and branch officials tried to persuade them to switch their matured savings deposits into new schemes offered through credit cooperatives run by Sahara. In an email, Sahara said it was not aware of this practice.

First planned city

Sahara said in a statement to Reuters the Aamby Valley project was valued at about Rs 1,00,000 crore ($14.76 billion), citing a 2014 report of property consultant Knight Frank’s India unit.

Markets regulator the Securities and Exchange Board of India (SEBI), which had asked the Supreme Court to order Sahara to repay investors, has pegged its value at about Rs 40,500 crore ($5.95 billion).

The high valuation claim of Sahara contrasts with the flagging financial profile of the project: Aamby Valley posted an after-tax profit of Rs 9 crore in the year ended March 2013 .