Sahara hasn’t done anything against the law: Subrata Roy

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Sahara Group, which obtained a stay from the Calcutta high court in December on the publication of Mint journalist Tamal Bandyopadhyay’s book Sahara: The Untold Story and filed a Rs.200 crore defamation suit against the author and his publisher Jaico Publishing House, has withdrawn the case following an amicable settlement. The book, which Bandyopadhyay wrote in his individual capacity, will now be released in May, a Jaico official said. The following is an edited excerpt from an interview given by Sahara Group chief Subrata Roy in January 2013, published in the book. Roy has been in judicial custody in New Delhi’s Tihar jail since 4 March, after being arrested on 28 February on a non-bailable warrant issued by the Supreme Court in connection with the non-refund of about Rs.20,000 crore that two group companies owe investors.

In the interview, Roy discusses a range of issues, from his connections with politics to interest in sports.

Author: Does Sahara keep politicians’ money?

Roy: Never. In fact, a few years back two big politicians—both good friends of mine—came to me and offered (to keep with) me big money. They said they had full faith in me and they wanted to keep Rs.10,000–15,000 crore with us.I told them, I am thankful to you that you have so much trust in me, but I will never keep your money. In 1978–79, when there was question of existence for us, my chartered accountant in Gorakhpur told me if we could just make an entry of Rs.10–15 lakh, we can earn a few thousand rupees, but I said no to it. I told these politicians, if I didn’t do it then why should I do it now?

Will you join politics?

No. Everybody offered me Rajya Sabha (seat), but I said no. I will never join politics.

Who is your closest friend? (former Samajwadi Party politician) Amar Singh or (Samajwadi Party leader) Mulayam Singh Yadav?

How can I tell you? I am close to everybody. If you are my friend, you’re my friend—I cannot be a nopungsak (coward) and disown you—I am not a fair-weather friend.

Is Sahara a vehicle for turning black money white?

In 34 years, we have not given any unsecured loan to anybody. Not even to our directors. If you keep Rs.100 worth of securities, we give you Rs.70.

The Supreme Court said you cooked up names like Kalawati and Haridwar as depositors.

It’s a baseless allegation. A newspaper sent its reporters to track them down and they recorded their statement.

There have been allegations that money raised by your group from investors through OFCDs (optionally fully convertible debentures), has been partly used to buy the London hotel. This is round-tripping.

If they find anything wrong, they can hang Sahara. We haven’t done anything against the law.

When we bought a guesthouse in Chelsea, somebody suggested some ways to buy the property, but I said we would buy openly—can’t we spend $25 million for a guesthouse? We are very strict on law matters. We vehemently oppose the allegation that the money for the acquisition of Grosvenor House Hotel was remitted from SIRECL (Sahara India Real Estate Corp.). The funds were remitted from Aamby Valley (Ltd) to its subsidiary Aamby Valley (Mauritius) (Ltd) which invested in the hotel. SIRECL is a real estate company. As per the objects of the company mentioned in its OFCD prospectus, it made a joint venture investment in some real estate projects with SICCL (Sahara India Commercial Corp.), another group company.

Sebi had not banned SIRECL in any manner whatsoever at the time it made a joint venture investment in SICCL on 20 November 2010. Thus, at any stage, there has not been a single incident of violation of any regulatory or legal requirement. The flow of funds is very much in accordance with the objects of the respective companies and we have been very open right from the beginning about the entire transaction.

Tell us about your failed aviation venture.

The reason for getting into aviation was that it would serve the nation. India needed a top-notch airline and Air India was incapable of delivering. Then came the price war as the competition intensified and more players were allowed in.

At that time, I told the concerned ministers, “Look, you should ask us—the existing players— to go for a low price model.” I would also like to mention that there is nothing called a low-cost model. It’s a low-price model. The cost is the same. We only save on in-flight food and beverages. I even said, don’t open the skies; there will be a problem. The minister said, no. So, I said, fine, we will not be in the picture. We got our money out of it… I am very happy we got out at the right time.

Except for finance, Sahara has not done well in any other areas.

It’s a very wrong impression. Today the asset value of the group is Rs.1,52,000 crore. I knew that one would never regret owning land if one purchased the right piece. I have done that continuously. We have 36,000 acres of land. We are not listed; we don’t need to maintain EPS (earnings per share). I prefer to save tax and give the money to my workers; spend on social work. Tax savings is not a crime. Had we been listed, you would have seen the profit. Recently, we have adopted 1,100 villages, spending Rs.550 crore.

You claimed to have repaid Rs.1,70,636 crore to 147 million people. How?

We started with prize chit schemes in 1978, but that was banned in 1980. Then we went for unincorporated body—Sahara India. When it was disallowed, we shifted to housing finance company. It did not have any ceiling. When ceiling was imposed (on raising deposits), we went for mutual benefit company. When that too was banned, we went for the RNBC (Residuary Non-Banking Company). We were doing very well—we were very happy. Right from the first year, we were making profits. But the RNBC was banned. Then we had to go for the OFCDs. Now we are into cooperatives. Our 10 million people (agents and employees) were depending on daily accounts. They wanted to start cooperatives. I told them to go ahead. They are the promoters; we are not. Not a single brilliant young entrepreneur who is not from a very rich family can ever hope to develop a big business in India.

What’s your flagship?

Oh, so many… difficult to say. Housing is a big project. We have the maximum land in the country—36,631 acres.

You are solid but not liquid—cash flow is a problem for you.

Not at all. We gave Sebi (Securities and Exchange Board of India) Rs.5,120 crore. We purchased two hotels in the US for thousands of crores. There is no dearth of money. We are an unlisted company. We don’t need to take care of the EPS. Why should we sell? Appreciation of land price is so huge—maybe Sahara is the richest company in the country.

What about other businesses?

Housing is doing well. Aamby Valley (a township project), Sahara Q Shop (the group’s retail store) are doing very well. By end of 2013, we should be touching definitely Rs.30,000 crore plus sales in Q Shop. We are helping the manufacturing units. We give them money, enhance the quality of infrastructure. We also procure (goods) from them. The Q Shop has a mixed model: delivery at doorstep, plus we are opening 40,000 outlets in next 15 months. They are all 300–700 sq ft stalls. Now we have around 900 outlets in Delhi, Mumbai, UP, Bihar and Jharkhand.

You spend so much money on sports. Is it love for sports, branding or nationalism?

A mixture of all these—I have been a sports lover. Right from the beginning, I felt that sports people and Bollywood actors are achievers. The first-generation achievers are good human beings across the world. They have no inhibitions, no false ego. I feel comfortable with them. I get attracted to them. I love them.

You love cricket.

When Wills (a cigarette brand of ITC Ltd in Kolkata) was going out (as sponsor of the Indian cricket team), they said a new sponsor will come. Mr Jagmohan Dalmia was there (as president of the BCCI). I said, this should not go to any multinational. Cricket has become a religion; call Indian parties, go for an open bid and finalize.I forgot about this and after a couple of months I heard it was going to IMG (International Management Group-Trans World International—IMG-TWI). It really hurt me. I immediately called up Dalmia and asked him why he did it. I told him that I wanted to take over the sponsorship unconditionally. He asked me if I would be willing to pay 10% more than what the MNC had offered. I had no idea what the amount was, but I said yes, and that’s how we got the sponsorship. It was definitely an emotional decision. I wanted to discontinue, but my cricketer friends would not allow me to do that.

You have 4,799 establishments. Won’t you plan to consolidate?

This government never gave us the opportunity. They banned one activity after another and we had to jump from one to other… All possible options are banned in India. We have to expand. I want to see my 10 million people living happily. We did one announcement in the company and everybody’s remuneration went up by 50%. I want to do that again. (In 2002, celebrating its 25th year, Sahara group announced a 25–50% hike in gross salaries for all its employees.)

What about stock market listing?

No more listing in India. Overseas, yes, but it’s too early (to say). I am not in favour of listing. It’s very costly—we don’t need (it). We have virtually no bank loan (on our books). We have taken bank loan only once for buying hotels overseas.

You are not a professional. Your company is run by your relatives.

I define professionalism as emotionalism. I am appointing 500 MBAs now. I have four sons. Sushanto and Seemanto are my sons. My elder sister died early and her sons Sudeep and Samrat are also mine. They are all doing well—one of them is always with me.

How has Sahara kept away labour trouble?

When people rise in profession, they get a fat bank balance, good life; they feel materially secure and then they change. Humans are not born bad… circumstances make them bad. We have taken an oath that nobody can share profit or asset of the company. It’s in the true sense an organized cooperative. My personal wealth—including that of my wife, four sons and daughters—will not be more than Rs.10–12 crore in 34 years. As a promoter-chairman, I should have hundreds or thousands of crores. But I don’t have even Rs.15 crore personal wealth… I am happy and content.

I always think about my workers—how my chaukidar (watchman) can send his son to a good school, my driver can have a good house.

Will you expand overseas to de-risk your business?

No. Hotel business is not profitable, but there is capital appreciation, especially for the iconic hotels. We bought the Grosvenor House Hotel in London for $470 million. It was priced at $1.2 billion. Though we are not a company that keeps on selling things if we get big valuation, we may dilute stake (in the hotel).

You are wearing an emerald and sapphire. Do you believe in astrology?

Astrology, like astronomy, is a science, but 99% of the astrologers are not so knowledgeable. I have got two astrologers who are accurate—one in Lucknow and another in Gorakhpur. These stones help to the extent when there is heavy rain, you should have raincoat and umbrella. These save you from getting drenched, but can’t prevent flood.

They are just a superficial support, but I found in astrology mental strength.

How’s life beyond work?

Family, people around me. We go to London when I am free, for pleasure with work. I have never stayed in my London hotel. I prefer to stay at the guesthouse. When we are free, we say, let’s dance. There are good singers in the group. At times, I sit with my friends. I don’t get much chance though. There are so many social obligations. I feel like doing other things, but where is the time?

Everyone is curious about your source of money? Where does it come from?

Sahara India Pariwar commenced its business activities in 1978 and diversified into various businesses like infrastructure and housing, electronic and print media, para-banking, mutual funds, life insurance, hotels, hospitals, sports academy, tourism, dairy products, etc.

The group’s activities started with para-banking activities and Sahara India Financial Corp. got registration with the Reserve Bank of India (RBI) as an RNBC. The company was primarily into accepting deposits from public and making investments as per the RBI directions. Prior to 2004, 80% of the deposits mobilized, including interest, was to be invested in directed securities and the balance 20% or five times of net owned fund as per the discretion of the board. However, from 2004 onwards, the RBI prohibited discretionary investments and the company has had to invest the entire amount in directed securities only. Sahara India Financial Corp. had invested in certain properties, including hotel Sahara Star, under discretionary investment category, which over the period had seen meteoric rise.

Apart from this, the group through private placement basis had mobilized resources specifically for making investments into the realty sector and several township and commercial projects were created out of the resources. The penetration in the realty sector was further enriched by availing loan and equity contribution from the market. The group has also taken bank loans for funding of several good projects which have resulted in generation of revenue leading to internal accruals like Sahara Estates Lucknow, Sahara Estates Gorakhpur, Sahara Ganj Mall, etc.

After Subrata Roy who? What is your succession plan?

Good question. I am very clear about it. We are in the process of setting up a trust that will own all shareholdings. My wife, family members as well as members of the workers will be trustees. Five or six officers also will be there. The trust will take all decisions—no family member can individually take any decision.

Where do we see Sahara ten years down the line?

Forget ten years; if we cannot do what we want to do in the next five years, we are clearly incompetent. Since we are not listed, you cannot judge us on market cap. In the next five years, in terms of assets and profits, Sahara will be among the top ten companies in the world.

(Printed with permission from Jaico Publishing House.)

Following the settlement with Sahara, the book will incorporate a disclaimer issued by Sahara which says, “The book at best can be treated as a perspective of the author with all its defamatory content, insinuations and other objections, which prompted us to exercise our right to approach the court of law… By getting the opportunity to put forward our objections in the form of a disclaimer…in the best tradition of Sahara and our respect for a journalist’s freedom, we are…withdrawing the case we had filed against the publication of the book.”

Sahara has filed a defamation case in a Patna court against Mint’s editor and some reporters over the newspaper’s coverage of the company’s dispute with Sebi. Mint is contesting the case.

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