Cash-strapped, Sahara chief Subrata Roy turns to employees for bail money

As founder-chairman Subrata Roy cools his heels in Tihar jail, the once cash-rich Sahara Group is struggling to raise funds to bail him out.

With an embargo imposed on the sale of assets, and the bank accounts of the Sahara Group already frozen by capital markets regulator Securities and Exchange Board of India (Sebi), the company has run out of conventional fundraising options. The group is now looking at garnering funds from well-wishers, friends and Sahara employees. Employees have, in fact, set out on a mission to raise around Rs 5,000 crore.

Abhijit Sarkar, head of Sahara Group's corporate communications division, told dna late Friday that a few employees and senior executives of the company were trying to raise funds "voluntarily", but denied that the group had issued any directive to this effect.

According to a PTI report, the money has been proposed to be collected in lieu of shares in Sahara's e-Multipurpose Society Ltd, which would be allotted to each contributing employee. The group has around 11 lakh employees and field workers.

Sahara India Group, which claims to be India's largest employer in the private sector, second only to the government-run Indian Railways, has business interests spanned over several sectors such as financial services, real estate, infrastructure, retail and hospitality, among others. In 2001, the group issued optionally fully convertible debentures (OFCDs) worth Rs 24,000 crore to 19.8 million investors.

Sahara is fighting a legal battle with Sebi over the issuance of a hybrid financial product, Optionally Fully Convertible Debentures (OFCDs), by the two group companies – Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing & Investment Corporation Ltd (SHICL).

Roy has been in jail for over three weeks now along with two company directors in a case filed by Sebi in the Supreme Court (SC) claiming Rs 24,500 crore the group raised by floating OFCDs in violation of regulatory norms.

The SC had sent Roy and two directors to jail on March 4, asking them to come up with a viable proposal for repayment of the money. In its latest ruling, the apex court has said that the trio could be released on bail only if the group deposits Rs 5,000 crore in cash and furnishes a bank guarantee of Rs 5,000 crore.

"If the court allows the group to sell assets, it will be a distress sale which would not fetch more than 20-25% of the real value of the asset," said a lawyer representing Sahara.

The lawyers believe that the bank guarantee of Rs 5,000 crore backed by assets takes at least three months. "So if we go for guarantee now, it will mean putting 100% cash. Therefore, the order implies that Rs 10,000 crore cash is wanted to secure release from jail, if the release is desired before three months," said the lawyer.